Jamie's Motor Home Sales currently sells 1,000 Class A motor homes, 2,500 Class C motor homes, and 4,000 pop-up trailers each year.Jamie is considering adding a mid-range camper and expects
That if she does so she can sell 1,500 of them.However, if the new camper is added, Jamie expects
That her Class A sales will decline to 950 units while the Class C campers decline to 2,200.The
Sales of pop-ups will not be affected.Class A motor homes sell for an average of €125,000 each.
Class C homes are priced at €39,500 and the pop-ups sell for €5,000 each.The new mid-range
Camper will sell for €47,900.What is the erosion cost?

Question

Quizplus · Accepted Answer

To calculate the erosion cost, we need to find the difference in revenue before and after the addition of the mid-range camper.
Before:

- Class A motor homes: 1,000 * €125,000 = €125,000,000
- Class C motor homes: 2,500 * €39,500 = €98,750,000
- Pop-up trailers: 4,000 * €5,000 = €20,000,000
- Total revenue: €243,750,000

After:

- Class A motor homes: 950 * €125,000 = €118,750,000
- Class C motor homes: 2,200 * €39,500 = €86,900,000
- Pop-up trailers: 4,000 * €5,000 = €20,000,000
- Mid-range camper: 1,500 * €47,900 = €71,850,000
- Total revenue: €297,500,000

The difference in revenue is €53,750,000, which is the erosion cost. Therefore, the answer is B.

Jamie's Motor Home Sales Currently Sells 1,000 Class a Motor