2.

Erosion costs. Heavenly Cookie Company reports the following annual sales and costs for its current product line: Click on this icono to download the data from this table Chocolate Snicker- Peanut Chip doodle Butter Volume 250,000 206,000 142,000 Price $0.60 $0.46 $0.53 Cost $0.23 $0.19 $0.18 Lemon Drop 81,000 $0.46 $0.22 Cream- Filled 91,000 $0.53 $0.34 Heavenly is thinking of adding Mississippi Mud brownies to the product line. The ultra-rich brownies would sell for $0.94 a piece and cost $0.80 to produce. The forecasted brownie volume is 223,000 per year. Introduction of brownies, however, will reduce cookie sales by 195,000, with the following drops in sales per cookie: 112,000 in chocolate chip, 40,000 in snickerdoodle, 26,000 in peanut butter, 8,000 in lemon drop, and 9,000 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