Food for Less (FFL), a grocery store, is considering offering one hour photo developing in their store. The firm expects that sales from the new one hour machine will be $150,000 per year. FFL currently offers overnight film processing with annual sales of $100,000. While many of the one hour photo sales will be to new customers, FFL estimates that 60% of their current overnight photo customers will switch and use the one hour service.
1. The level of incremental sales associated with introducing the new one hour photo service is closest to:
A) $90,000
B) $150,000
C) $60,000
D) $120,000
2. Suppose that of the 60% of FFL's current overnight photo customers, half would start taking their film to a competitor that offers one hour photo processing if FFL fails to offer the one hour service. The level of incremental sales in this case is closest to:
A) $60,000
B) $150,000
C) $90,000
D) $120,000