Question

Winnebagel Corp. currently sells 44,032 motor homes per year at $42,913 each, and 15,701 luxury motor coaches per year at $101,254 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 19,443 of these campers per year at $11,994 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 2,831 units per year, and reduce the sales of its motor coaches by 1,873 units per year. What is the amount to use as the annual sales figure when evaluating this project?

Answer 1

Sales due solely to the new product line = 19,443 * $11,994 = $233,199,342

Increased sales of the motor home line occur because of the new product line introduction; thus:

2,831 * $42,913 = $121,486,703

in new sales is relevant. Erosion of luxury motor coach sales is also due to the new mid-size campers; thus

1,873 * $101,254 = $189,648,742 loss in sales

is relevant. The net sales figure to use in evaluating the new line is thus:

Net sales = $233,199,342 + $121,486,703 - $189,648,742

Net sales = $165,037,303