Travel America Coaches currently sells 15,000 motor homes per year at $94,000 ea

Question

Travel America Coaches currently sells 15,000 motor homes per year at $94,000 each, and 1,500 luxury motor coaches per year at $159,000 each. The company wants to introduce a low-range camper to fill out its product line; it hopes to sell 6,000 of these campers per year at $14,500 each. An independent consultant has determined that if Travel Coaches introduces the new campers, it should boost the sales of its existing motor homes by 1,500 units per year, and reduce the sales of its luxury motor coaches by 450 units per year. What amount should be used as the annual sales figure when evaluating this project?

$87,000,000

$97,400,000

$156,450,000

$186,750,000

$228,000,000

Explanation / Answer

Revenue from low range camper - 6000 units * $14,500/unit $87,000,000 Add: Increase in Sales of Existing Motor Homes - 1500 units * $94,000/unit $141,000,000 $228,000,000 Less: Reduction in sales of Luxury Motor Coaches - 450 units * $159,000/unit $71,550,000 Net Incremental Revenue $156,450,000 Hence, $156,450,000 should be used as the annual sales figure when evaluating this project

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