Question
The Shaolin Ice Cream Shoppe currently sells 4,000 of its French-Vanilla Bonbons, annually, for $3.00 per serving; the cost per serving is $1.50. Chef Raekwon
The Shaolin Ice Cream Shoppe currently sells 4,000 of its French-Vanilla Bonbons, annually, for $3.00 per serving; the cost per serving is $1.50. Chef Raekwon has come up with a new dessert item, the Deluxe Caramel Sundae, which costs $1.75 per serving and will retail for $3.75. It is estimated that 2,000 of these new treats will be sold, annually. It is also estimated that after the launch of the new sundaes, sales of the original French-Vanilla Bonbons will drop by 35%. Calculate the erosion cost and incremental cash flow associated with the Shaolin Ice Cream Shoppes new venture.
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