Erosion costs. Fat Tire Bicycle Company currently sells 40,000 bicycles per year. The current bike is a standard balloon-tire bike selling for$90, with a production and shipping cost of $35. The company is thinking of introducing an off-road bike with a projected selling price of $410 and a production and shipping cost of $360. The projected annual sales for the off-road bike are 12,000. The company will lose sales in fat-tire bikes of 8,000 units per year if it introduces the new bike, however. What is the erosion cost from the new bike? Should Fat Tire start producing the off-road bike?
Erosion costs. Fat Tire Bicycle Company currently sells 40,000 bicycles per year. The current bike is a standard balloon-tire bike selling for$90, with a production and shipping cost of $35. The company is thinking of introducing an off-road bike with a projected selling price of $410 and a production and shipping cost of $360. The projected annual sales for the off-road bike are 12,000. The company will lose sales in fat-tire bikes of 8,000 units per year if it introduces the new bike, however. What is the erosion cost from the new bike? Should Fat Tire start producing the off-road bike?
Chapter10: Short-term Decision Making
Section: Chapter Questions
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Erosion costs.
Fat Tire Bicycle Company currently sells 40,000 bicycles per year. The current bike is a standard balloon-tire bike selling for$90, with a production and shipping cost of $35. The company is thinking of introducing an off-road bike with a projected selling price of $410 and a production and shipping cost of $360. The projected annual sales for the off-road bike are 12,000. The company will lose sales in fat-tire bikes of 8,000 units per year if it introduces the new bike, however. What is the erosion cost from the new bike? Should Fat Tire start producing the off-road bike?
What is the erosion cost from the new bike?
$_______
Should Fat Tire start producing the off-road bike?
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