Erosion costs. Heavenly Cookie Company reports the following annual sales and costs for its current product line: Chocolate Chip Snicker- doodle Peanut Butter Lemon Drop Cream- Filled Volume 254,000 208,000 145,000 81,000 91,000 Price $0.50 $0.45 $0.53 $0.46 $0.54 Cost $0.22 $0.19 $0.19 $0.22 $0.33 Heavenly is thinking of adding Mississippi Mud brownies to the product line. The ultra-rich brownies would sell for $0.97 a piece and cost $0.85 to produce. The forecasted brownie volume is 223,000 per year. Introduction of brownies, however, will reduce cookie sales by 191,500, with the following drops in sales per cookie: 110,000 in chocolate chip, 38,000 in snickerdoodle, 27,000 in peanut butter, 7,000 in lemon drop, and 9,500 in cream-filled. What is the erosion cost of introducing the brownies? What is the net change in annual margin if Mississippi Mud brownies are added to the product line? What is the erosion cost of introducing the brownies? (Round to the nearest dollar.) What is the net change in annual margin if Mississippi Mud brownies are added to the product line? (Round to the nearest dollar.) Should the brownies be adopted into the product line? (Select the best response.) A.Do not add brownies to the product mix. B.Add brownies to the product mix.
Erosion
costs.
Heavenly Cookie Company reports the following annual sales and costs for its current product line:
|
Chocolate Chip |
Snicker- doodle |
Peanut Butter |
Lemon Drop |
Cream- Filled |
||
|
Volume |
254,000 |
208,000 |
145,000 |
81,000 |
91,000 |
|
|
Price |
$0.50 |
$0.45 |
$0.53 |
$0.46 |
$0.54 |
|
|
Cost |
$0.22 |
$0.19 |
$0.19 |
$0.22 |
$0.33 |
Heavenly is thinking of adding Mississippi Mud brownies to the product line. The ultra-rich brownies would sell for
$0.97
a piece and cost
$0.85
to produce. The
223,000
per year. Introduction of brownies, however, will reduce cookie sales by
191,500,
with the following drops in sales per cookie:
110,000
in chocolate chip,
38,000
in snickerdoodle,
27,000
in peanut butter,
7,000
in lemon drop, and
9,500
in cream-filled. What is the erosion cost of introducing the brownies? What is the net change in annual margin if Mississippi Mud brownies are added to the product line?
What is the erosion cost of introducing the brownies?
(Round to the nearest dollar.)
What is the net change in annual margin if Mississippi Mud brownies are added to the product line?
(Round to the nearest dollar.)
Should the brownies be adopted into the product line? (Select the best response.)
A.Do not add brownies to the product mix.
B.Add brownies to the product mix.
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