Larson, Inc., manufactures backpacks. Last year, it sold 102,000 of its basic mo
ID: 2522420 • Letter: L
Question
Larson, Inc., manufactures backpacks. Last year, it sold 102,000 of its basic model for $25 per unit. The company estimates that this volume represents a 30 percent share of the current market. The market is expected to increase by 10 percent next year. Marketing specialists have determined that as a result of new competition, the company’s market share will fall to 25 percent (of this larger market). Due to changes in prices, the new price for the backpacks will be $22 per unit. This new price is expected to be in line with the competition and have no effect on the volume estimates.
Required:
Estimate Larson’s sales revenues from this model of backpack for the coming year?
Explanation / Answer
Current total market=102000/30%= 340000 Next year market = 340000*1.1= 374000 Larson’s new market share = 374000*25%= 93500 Larson’s sales revenues from this model of backpack for the coming year=93500*22= $2057000
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