Use the information for the question(s)below.
Food For Less (FFL),a grocery store,is considering offering one hour photo developing in their store.The firm expects that sales from the new one-hour machine will be $150,000 per year.FFL currently offers overnight film processing with annual sales of $100,000.While many of the one-hour photo sales will be to new customers,FFL estimates that 60% of their current overnight photo customers will switch and use the one-hour service.
-The level of incremental sales associated with introducing the new one-hour photo service is closest to:
A)$90,000.
B)$150,000.
C)$60,000.
D)$120,000.

Question

Quizplus · Accepted Answer

The incremental sales are calculated by taking the new sales from the one-hour service and subtracting the lost sales from the overnight service. The lost sales are 60% of the current $100,000 overnight sales, which is $60,000. Therefore, the incremental sales are $150,000 (new sales) - $60,000 (lost sales) = $90,000.

Use the Information for the Question(s)below