Erosion costs. Fat Tire Bicycle Company currently sells 39,000 bicycles per year. The current bike is a standard balloon-tire bike selling for $100, with a production and shipping cost of $30. The company is thinking of introducing an off-road bike with a projected selling price of $370 and a production and shipping cost of $250. The projected annual sales for the off-road bike are 14,000. The company will lose sales in fat-tire bikes of 9,000 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 39,000 bicycles per year. The current bike is a standard balloon-tire bike selling for $100, with a production and shipping cost of $30. The company is thinking of introducing an off-road bike with a projected selling price of $370 and a production and shipping cost of $250. The projected annual sales for the off-road bike are 14,000. The company will lose sales in fat-tire bikes of 9,000 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?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Chapter 10, Question 1
Transcribed Image Text:**Erosion Costs**
Fat Tire Bicycle Company currently sells 39,000 bicycles per year. The current bike is a standard balloon-tire bike selling for $100, with a production and shipping cost of $30. The company is thinking of introducing an off-road bike with a projected selling price of $370 and a production and shipping cost of $250. The projected annual sales for the off-road bike are 14,000. The company will lose sales in fat-tire bikes of 9,000 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?
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