Maker of pop tarts recent introduces a new flavor, gone nutty. Although the new product will reap a higher wholesale price ($1.20 per box vs $1.00 original flavor) it also comes with higher variable costs ($0.55 for the new flavor, $0.30 for the original).
Assume the company expects to sell 5 million packages of the new flavor in the first year after the introduction but expects 80% of those sales to come from buyers who would normally purchase existing poptarts. Assuming the sales of regular pop tarts are normally 300 million packages per year and the company will inccur and increase in fixed costs of $500,000 during the first year of the new launch, will the new product be profitable for the company? Show calculations.