Question

Marshall Motor Homes currently sells 1,160 Class A motor homes, 2,170 Class C motor homes, and 1,600 pop-up trailers each year. It is considering adding a midrange camper and expects that if it does so the firm can sell 800 of them. However, if the new camper is added, the firm expects its Class A sales to decline by 8 percent while the Class C camper sales decline to 1,950 units. The sales of pop-ups will not be affected. Class A motor homes sell for an average of $179,000 each. Class C homes are priced at $64,500, and the pop-ups sell for $5,700 each. The new midrange camper will sell for $26,900. What is the erosion cost of the new camper

Answer 1

Answer:

$30,801,200

Explanation:

Calculation to determine the erosion cost of the new camper

Erosion cost (new camper) = [0.08 × 1,160 × $179,000] + [(2,170 − 1,950) × $64,500]

Erosion cost (new camper)=$16,611,200+$14,190,000

Erosion cost (new camper) = $30,801,200

Therefore the erosion cost of the new camper will be $30,801,200