Heavenly Cookie Company has the following annual sales and costs for its current product line:

Heavenly is thinking of adding Mississippi Mud brownies to the product line. The ultra-rich brownies would sell for $0.99 a piece and cost $0.81 to produce. The forecasted brownie volume is 250,000 per year. Introduction of brownies, however, will reduce cookie sales by 250,000 with the following drop in sales per cookie: 130,000 in chocolate chip, 60,000 in snickerdoodle, 40,000 in peanut butter, 10,000 in lemon drop, and 10,000 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 productline?

  • CreatedMay 08, 2014
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