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Erosion costs. Heavenly Cookie Company reports the following annual sales and costs for its current product line: Click on this icon to download the
Erosion costs. Heavenly Cookie Company reports the following annual sales and costs for its current product line: Click on this icon to download the data from this table Chocolate Snicker- Peanut Lemon Cream- Chip doodle Butter Drop Filled Volume Price Cost 251,000 208,000 143,000 80,000 90,000 $0.80 $0.45 $0.55 $0.22 $0.18 $0.18 $0.49 $0.25 $0.57 $0.30 Heavenly is thinking of adding Mississippi Mud brownies to the product line. The ultra-rich brownies would sell for $0.91 a piece and cost $0.80 to produce. The forecasted brownie volume is 224,000 per year. Introduction of brownies, however, will reduce cookie sales by 179,000, with the following drops in sales per cookie: 100,000 in chocolate chip, 35,000 in snickerdoodle, 28,000 in peanut butter, 7,000 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?
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