Larson, Inc., manufactures backpacks. Last year, it sold 93,000 of its basic mod
ID: 2610207 • Letter: L
Question
Larson, Inc., manufactures backpacks. Last year, it sold 93,000 of its basic model for $20 per unit. The company estimates that this volume represents a 30 percent share of the current market. The market is expected to increase by 15 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 $17 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
Total market volume current year = 93000/30%= 310000 Total market volume coming year = 310000*1.15= 356500 Sales revenues for the coming year = 356500*25%*17= 1515125
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