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Erosion costs. Heavenly Cookie Company reports the following annual sales and costs for its current product line: Chocolate Snicker- Peanut Lemon Cream- Filled Chip doodle
Erosion costs. Heavenly Cookie Company reports the following annual sales and costs for its current product line: Chocolate Snicker- Peanut Lemon Cream- Filled Chip doodle Butter Drop Volume 250,000 207,000 143,000 83,000 98,000 $0.40 $0.48 $0.55 0.48 $0.58 Price $0.23 $0.20 $0.16 $0.22 $0.30 Cost Heavenly is thinking of adding Mississippi Mud brownies to the product line. The ultra-rich brownies would sell for $0.92 a piece and cost $0.85 to produce. The forecasted brownie volume is 223,000 per year. Introduction of brownies, however, will reduce cookie sales by 180,500, with the following drops in sales per cookie: 100,000 in chocolate chip, 35,000 in snickerdoodle, 27,000 in peanut butter, 9,000 in lemon drop, and 9,500 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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