Sales, Finance

[financier]

[FONT=&quot]FoodFor Less (FFL), a grocery store, is considering offering one hour photodeveloping in their store. The firmexpects that sales from the new one hour machine will be $150,000 peryear. FFL currently offers overnightfilm processing with annual sales of $100,000. While many of the one hour photo sales will be to new customers, FFLestimates that 60% of their current overnight photo customers will switch anduse the one hour service.
[/FONT]
[FONT=&quot]Supposethat of the 60% of FFL's current overnight photo customers, half would starttaking their film to a competitor that offers one hour photo processing if FFLfails to offer the one hour service. Thelevel of incremental sales in this case is closest to:[/FONT]
[FONT=&quot]A) $60,000[/FONT]
[FONT=&quot]B) $150,000[/FONT]
[FONT=&quot]C) $90,000[/FONT]
[FONT=&quot][/FONT]
[FONT=&quot]D) $120,000

Please provide your answer/explanation and calculations. Thank you.[/FONT]

 

[Deleted member 4993]

FoodFor Less (FFL), a grocery store, is considering offering one hour photodeveloping in their store. The firmexpects that sales from the new one hour machine will be $150,000 peryear. FFL currently offers overnightfilm processing with annual sales of $100,000. While many of the one hour photo sales will be to new customers, FFLestimates that 60% of their current overnight photo customers will switch anduse the one hour service.

Supposethat of the 60% of FFL's current overnight photo customers, half would starttaking their film to a competitor that offers one hour photo processing if FFLfails to offer the one hour service. Thelevel of incremental sales in this case is closest to:
A) $60,000
B) $150,000
C) $90,000

D) $120,000

Please provide your answer/explanation and calculations. Thank you.

What are your thoughts?

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[financier]

Ok. I don't understand which incremental sales should I count because the one hour service doesn't even work (as said in this task, it failed). But if I counted incremental sales of overnight service, then it would stay $100,000.
For some reason I think that this problem is meant to check if we are able to notice that competitors are not taken into account when counting incremental sales. Then the answer should be C (if we're counting incremental sales of one hour service).

 

[stapel]

Ok. I don't understand which incremental sales should I count because the one hour service doesn't even work (as said in this task, it failed)

What do you mean when you say that "the one hour service doesn't even work" and that "it failed"? The only mention of failure was the percentage of current customers who might switch to a competitor if FFL fails to (that is, doesn't) enact the new plan.