Jenna's Home Spa Sales Currently Sells 2,000 Class a Spas

question 231

Multiple Choice

Jenna's Home Spa Sales currently sells 2,000 Class A spas, 5,000 Class C spas, and 1,000 deluxe model spas each year. Jenna is considering adding a mid-class spa and expects that if she does
She can sell 2,500 of them. However, if the new spa is added, Jenna expects that her Class A sales
Will decline to 1,700 units while the Class C sales decline to 4,500. The sales of the deluxe model
Will not be affected. Class A spas sell for an average of $75,000 each. Class C spas are priced at
$25,000 and the deluxe model sells for $100,000 each. The new mid-range spa will sell for
$50,000. What is the erosion cost?

• A) $35,000,000
• B) $90,000,000
• C) $125,000,000
• D) $205,000,000
• E) $240,000,000

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