Question

Winnebagel Corp. currently sells 32300 motor homes per year at $51000 each, and 10200 luxury motor coaches per year at $118000 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 20000 of these campers per year at $10700 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 6600 units per year, and reduce the sales of its motor coaches by 1000 units per year. What is the amount to use as the annual sales figure when evaluating this project?

Answer #1

Solution: | ||||

Net Sales $ | 432,600,000 | |||

Working Notes: | ||||

The amount to use as the annual sales figure when evaluating this project, should be relevant sales only , not the sales that will occur after & before the effect of this project. | ||||

That is the only sale value of new portable camper and increased sale value of motor homes and decreased sale value of motor coaches | ||||

Product | Quantity | Price | Sales | |

New portable camper | 20,000 | $10,700 | $214,000,000 | |

Add: Increase in motor homes | 6600 | $51,000 | $336,600,000 | |

Less: Decrease in motor coaches | -1,000 | $118,000 | ($118,000,000) | |

Net Sales | $432,600,000 | |||

Please feel free to ask if anything about above solution in comment section of the question. |

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