Winnebagel Corp. currently sells 16,800 motor homes per year at $25,200 each, an

Question

Winnebagel Corp. currently sells 16,800 motor homes per year at $25,200 each, and 6,720 luxury motor coaches per year at $47,600 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 10,640 of these campers per year at $6,720 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 2,520 units per year, and reduce the sales of its motor coaches by 504 units per year. Required : What is the amount to use as the annual sales figure when evaluating this project?

Explanation / Answer

Corrected Answer:

Sales due solely to the new product line are:
10,640 ($6,720) = $71,500,800

Increased sales of the motor home line occur because of the new product line introduction; thus:
2,520 ($25,200) = $63,504,000

in new sales is relevant. Erosion of luxury motor coach sales is also due to the new mid-size campers;thus:
504 ($47,600) = $23,990,400 loss in sales
is relevant. The net sales figure to use in evaluating the new line is thus:
$71,500,800 + 63,504,000 - 23,990,400 = $111,014,400

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