Pisa Pizza, a seller of frozen pizza, is considering introducing a healthier ver
ID: 2730138 • Letter: P
Question
Pisa Pizza, a seller of frozen pizza, is considering introducing a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The firm expects that sales of the new pizza will be $15 million per year. While many of these sales will be to new customers, Pisa Pizza estimates that 37% will come from customers who switch to the new, healthier pizza instead of buying the original version a. Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new pizza? (round to two decimal places $XMillion) b. Suppose that 51% of the customers who will switch from PisaPizza's original pizza to its healthier pizza will switch to another brand if PisaPizza does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this case?(round to two decimal places $XMillion)
Explanation / Answer
A. Incremental sales = sales to the new customers = $15 million * (100-37) = $9.45 million as 37% are of old customers who will be purchasing the new pizza insted of old pizza.
B. Incremental sales = $15 million * [100 - 37(100-51)] = $12.28 million as 37% are of old customers who will be purchasing the new pizza insted of old pizza and out of 37%, 51% of the customers whill not purchase the new pizza if it is not healthy.