**Analysis of Erosion Cost in Shoe Pricing**Foamsoft, a company specializing in customized boat shoes, sells 16,850 pairs annually at an average price of $75 per pair. The company is considering introducing a more affordable line of shoes priced at $59 per pair. They project that 4,500 pairs of these lower-priced shoes could be sold. However, this move is expected to result in selling 1,100 fewer pairs of their higher-priced offering.**Problem Statement:**Calculate the estimated value of the erosion cost that should be charged to the lower-priced shoe project.**Solution Approach:**1. **Current Shoe Sales:** - Total high-priced shoes sold annually: 16,850 pairs - Price per pair: $752. **Projected New Shoe Sales:** - New lower-priced shoes projected sales: 4,500 pairs - New price per pair: $59 - Reduction in high-priced shoes sales: 1,100 pairs3. **Erosion Cost Calculation:** - Revenue loss from reduced sales of high-priced shoes: - 1,100 pairs x $75 = $82,500The erosion cost of $82,500 should be attributed to the lower-priced shoe project due to the anticipated decrease in the sales of high-priced shoes. Understanding such erosion costs is critical when assessing the impact of introducing new product lines on existing product revenues.

The company sells multiple products to earn more money. The company can decide on the sales mix to…

Answered: 29) Foamsoft sells customized boat…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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