Answer:
The erosion cost = $ 49,190,000
Explanation:
Given:
Class A motor homes sold = 1,200
Class C motor homes sold = 2,600
pop-up trailers sold = 4,000
if the new camper is added,
decline in class A sales = 10%
Decline in class C sales = 2,100 units
Average cost of class A motor homes = $ 162,000
Average cost of class C homes = $ 59,500
Selling price for the pop-ups = $ 5,500
cost of the new mid-range camper = $ 32,900
Now,
Erosion cost is given as = Total decline in revenue from the sales
= (Decline in class A sales × Average cost of class A motor homes ) + (Decline in class C sales × Average cost of class C motor homes )
Erosion cost = ( 0.10 × 1,200 × $ 162,000 ) + ( (2,600 - 2,100) × $ 59,500 )
or
Erosion cost = 19,440,000 + 29,750,000
or
The erosion cost = $ 49,190,000
