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Question - Jamie's Motor Home Sales currently sells 160 Class A motor homes, 320 Class C motor homes, and 230 pop-up trailers each year. They are considering adding a mid-range camper with expected annual sales of 400 units. However, if the new camper is added, Class A sales will decline to 90 units and the Class C camper sales will decline to 250 units. The sales of pop-ups will not be affected. Class A motor homes sell for an average of $150,000 each. Class C homes are priced at $61,500, and the pop-ups sell for $6,000 each. The new mid-range camper will sell for $41,900.
What is the annual erosion cost of adding the mid-range camper?
What is the total annual incremental cash flow from the new product?
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