Winnebagel Corp. currently sells 28,700 motor homes per year at $76,500 each and

Question

Winnebagel Corp. currently sells 28,700 motor homes per year at $76,500 each and 7,700 luxury motor coaches per year at $118,500 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 23,700 of these campers per year at $22,500 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 3,300 units per year and reduce the sales of its motor coaches by 920 units per year. Required: What is the amount to use as the annual sales figure when evaluating this project?

Explanation / Answer

Annual sales from this new project will be incremental sales:

Revenue from portable Camper = 23,700 x 22,500            = $533,250,000

Incremental revenue from motor homes = 3300 x 76,500 = 252,450,000

Incremental revenue motor coaches = -920 x 118,500        = -109,020,000

                Total sales revenue from the project                      = 676,680,000

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