Erosion

costs.

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

$30.

The company is thinking of introducing an off-road bike with a projected selling price of

$390

and a production and shipping cost of

$250.

The projected annual sales for the off-road bike are

16,000.

The company will lose sales in fat-tire bikes of

7,500

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?

$nothing

(Round to the nearest dollar.)