The chicken or the egg: hatching a new and innovative product

Case Questions: Would you decide to “hatch” Chicken 

Sensations? Put yourself in Vicki’s shoes. Prepare an analysis 

that will guide PFVC’s decision on whether to launch 

Chicken Sensations. 

1.   Economic feasibility analysis: Perform an economic cost-

benefit analysis of whether PFVC should launch Chicken 

Sensations. Clearly state your decision and conclusion 

from your analysis. (You can use an Excel spreadsheet to 

complete these tasks in an organized, neat appendix to 

your case analysis. A reader of your case should be able 

to follow your work and computations. The results of 

your appendix analyses can be referenced in the body of 

your case to support your decision.) To aid your analysis, 

perform the following tasks:

  a.   Quantity, revenue, and cost conversions: Take Vicki’s 

data from Table 1 and compute the quantity, revenue, 

and cost conversions to complete Table 1. For 

example, calculate annual sales revenues (in cases), 

sales revenue and variable cost amounts per case, and 

annual fixed cost amounts. 

  b.  Forecasted contribution margin income statement: 

Prepare a forecasted Chicken Sensations contribution 

margin format income statement for year 1 based on 

the projected data gathered by Vicki. 

  c.   Breakeven analysis: Prepare a breakeven point 

analysis (in cases and sales dollars) for the year 1 

forecasts of Chicken Sensations. 

  d.  Margin of safety: Prepare a margin of safety analysis 

(in cases and sales dollars) for the year 1 forecasts of 

Chicken Sensations.

  e.   Sensitivity analyses: Prepare sensitivity analyses to 

examine how robust year 1 results are to changes in 

projections for (1) the sales volume of cases, (2) the 

sales price per bag, and (3) the cost per pound of 

chicken. Assume that these amounts can change for 

three different projection levels as reported in Table 2: 

(1) a pessimistic level, (2) the original level, and (3) an 

optimistic level. Table 2 shows that the sales volume 

(in cases) will be 75% of the original year 1 sales 

forecast, the sales price per bag will only be 90% of 

the original forecast (or $2.70/bag = $3.00/bag × 90%), 

and the cost per pound of chicken will rise to 112.50% 

of the original forecast (or $2.25 /lb. = $2.00/lb. × 

112.50%) for the pessimistic level. The original level 

reports the results using the original projections in 

the case. Under the optimistic level, the sales volume 

forecast (in cases) will be 125% of the original year 1 

sales forecast, the sales price per bag will increase to 

110% of the original forecast (or $3.30/bag = $3.00/

bag × 110%), and the cost per pound of chicken will 

decrease to 87.50% (or $1.75 /lb. = $2.00/lb. × 87.50%).

  Report your sensitivity analysis results in Table 3.

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