Question

Winnebagel Corp. currently sells 36,234 motor homes per year at $53,639 each, and 14,446 luxury motor coaches per year at $108,552 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 24,720 of these campers per year at $13,291 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 5,002 units per year, and reduce the sales of its motor coaches by 627 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 = 24,720 * $13,291 = $328,553,520

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

5,002 * $53,639 = $268,302,278

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

627 * $108,552 = $68,062,104 loss in sales

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

Net sales = $328,553,520 + $268,302,278 - $68,062,104

Net sales = $528,793,694