1) Fat Tire Bicycle Company currently sells 36,000 bicycles per year. The Current bike is a standard balloon-tire bike selling for $100, with a production and shipping cost of $25. The company is thinking of introducting an off-road bike with a projected selling price of $380 and a production and shipping cost of $225. The projected annual sales for the off-road bike are 13,000. The company will lose sales in fat-tire bikes of 7,500 units per year if it introduces the new bike, however.

A) What is the erosion cost from the new bike?

B) Should Fat Tire start producing the off-road bike?