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10.1 Erosion costs. Fat Tire Bicycle Company currently sells 39,000 bicycles per year. The current bike...

10.1 Erosion costs.

Fat Tire Bicycle Company currently sells 39,000 bicycles per year. The current bike is a standard​ balloon-tire bike selling for ​$110​, with a production and shipping cost of ​$30. The company is thinking of introducing an​ off-road bike with a projected selling price of ​$410 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 9,500 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?

​$___ (Round to the nearest​ dollar.)

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Answer #1

Calculation of Erosion Cost: Erosion Cost = Number of units of Old Bike * (Selling Price - Production Cost) = 9500 * (110 - 3

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