Erosion costs. Fat Tire Bicycle Company currently sells $36,000$ bicycles per year. The current bike is a standard balloon$-$tire bike selling for $$110,$ with a production and shipping

cost of $$40.$ The company is thinking of introducing an off$-$road bike with a projected selling price of $$390$ and a production and shipping cost of $$300.$ The projected annual sales

for the off$-$road bike are $17,000.$ The company will lose sales in fat$-$tire bikes of $8,500$ 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?

What is the erosion cost from the new bike?

$

$($Round to the nearest dollar.$)$

Should Fat Tire start producing the off$-$road bike? $($Select the best response.$)$

A$.$ Yes, because it contributes an additional $$935,000$ of cash flow.

B$.$ No$,$ because it does not improve the profitability of the company.