Decide whether to sell both SKUs

Quick Overview

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.

Decide whether to sell both SKUs

Company: Capital One

Role: Data Scientist

Category: Analytics & Experimentation

Difficulty: medium

Interview Round: Technical Screen

Derive the condition under which adding the Vegan burger increases total profit, given: Regular unit margin $3, Vegan unit margin $2, fixed vegan costs F (training + supplier retainer), and cannibalization rate c (fraction of Vegan sales that would have been Regular). Express the break-even Vegan unit sales as a function of F and c, interpret edge cases (c = 0 and c = 1), and describe how you would estimate c in practice.

Quick Answer: 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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Oct 13, 2025, 9:49 PM
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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

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