Decide whether to sell both SKUs

Q: Decide whether to sell both SKUs

This question evaluates a data scientist's competency in profit-impact modeling, break-even analysis, and accounting for cannibalization effects using unit contribution margins and fixed costs.

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Question

Profit Impact of Introducing a Vegan Burger

Context

A restaurant is considering adding a Vegan burger alongside its existing Regular burger. The unit contribution margins are:

Regular burger margin: $3
Vegan burger margin: $2

Launching Vegan incurs a fixed cost F (e.g., training and supplier retainer). Let c be the cannibalization rate: the fraction of Vegan sales that would otherwise have been Regular sales (i.e., substitution rather than incremental).

Tasks

Derive the condition under which adding the Vegan burger increases total profit.
Express the break-even Vegan unit sales V_BE as a function of F and c.
Interpret the edge cases c = 0 and c = 1.
Describe how you would estimate c in practice.

Decide whether to sell both SKUs

Profit Impact of Introducing a Vegan Burger

Context

Tasks

Solution

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Decide whether to sell both SKUs

Overview

Profit Impact of Introducing a Vegan Burger

Context

Tasks

Solution

Comments (0)