Answer:
McBurger Inc.
Introduction of Healthylicious-n-Safe
I think that McBurger should launch this new product. If McBurger can capture more than 28% of the meatless burger market, it can break-even in 12 months and start earning huge profits in 18 months when there will be nil promotion costs.
Explanation:
Annual projected market sales of meatless burger = 1,250,000 boxes
Content of each box of Healthylicious-n-Safe = 8 burgers
Fixed cost per month = $35,000
Total annual fixed cost = $420,000 ($35,000 * 12)
Estimated variable cost of making one burger = $0.875
Estimated variable cost of a box of 8 burgers = $7 ($0.875 * 8)
Cost of promotional campaign in the first 12 months = $275,000
Total annual fixed cost including promotions = $695,000
Expected selling price per box of Healthylicious-n-Safe = $9
Estimated variable cost per box of Healthylicious-n-Safe 7
Contribution margin per box of Healthylicious-n-Safe = $2
Sales units required to break-even = Total fixed costs/Contribution margin per box
= $695,000/$2 = 347,500 boxes
This sales units break-even point represents 27.8% of the meatless burger market (347,500/1,250,000 * 100)
