Question

Winnebagel Corp. Sells 30,000 motor homes per year for $73,000 and 14,000

luxury motor coaches per year for $120,000 each. The company wants to

introduce a new portable camper to fill out its product line; it hopes to sell

25,000 of these campers per year at $19,000 each. An independent consultant

determined if Winnebagel introduces its new camper, it will boost sales of its

motor homes by 2.700 units per year and REDUCE the sale of its motor coaches

by 1,300 units / year. What is the amount to use as the annual sales figure when

evaluating the project? Justify your answer.

Answer 1

Solution:

It is given that if they introduce new Portable Camper then they will be able to sale 25,000 unit at $19,000 each

Total sales = $19,000 *25,000 = 475,000,000

But it will also impact the existing product as sales of motor homes will increase by 2700 unit while sales of motor coaches will reduce by 1,300 units

So we will have to keep that into account as well

Impact of increase of sales of motor homes = 2700 * 73000 = $197,100,000

Impact of decrease of sales of motor coaches = 1300 * 1,200,000 = $156,000,000

Annual sales figure for this project =  $475,000,000 + $197,100,000 - $156,000,000 = $516,100,000

Total sales figure of all the product = 30000*73000+14000*1,200,000 +516,100,000 = 4,386,100,000

Answer is $516,100,000 for new project