Heavenly Cookie Company reports the following annual sales and costs for its current product line:...
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Heavenly Cookie Company reports the following annual sales and costs for its current product line:
| Chocolate Chip | Snickerdoodle | Peanut Butter | Lemon Drop | Cream-Filled | |
| Volume | 250000 | 204000 | 140000 | 81000 | 94000 |
| Price | $0.40 | $0.48 | $0.54 | $0.46 | $0.58 |
| Cost | $0.21 | $0.20 | $0.16 | $0.21 | $0.33 |
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 $0.80 to produce. The forecasted brownie volume is 223,000 per year. Introduction of brownies, however, will reduce cookie sales by 190,500,with the following drops in sales per cookie:110,000in chocolate chip, 36,000 in snickerdoodle, 28,000 in peanut butter, 7,000 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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