Question

Winnebagel Corp. currently sells 42,000 motor homes per year at $63,000 each, and 16,800 luxury motor coaches per year at $119,000 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 26,600 of these campers per year at $16,800 each. An independent consultant has determined that if the company introduces the new campers, it should boost the sales of its existing motor homes by 6,300 units per year, and reduce the sales of its motor coaches by 1,260 units per year.

  

What is the amount to use as the annual sales figure when evaluating this project?

Answer 1

Projected Annual Sales

The amount to use as the annual sales figure when evaluating this project = Sale Value of the campers + Increase in the sale of motor homes - Reduction in the sale of luxury motor coaches

Sale Value of the campers = $446,880,000 [26,600 Campers x $16,800 per Camper]

Increase in the sale of motor homes = $396,900,000 [6,300 Motor Homes x $63,000 per Motor Home]

Reduction in the sale of luxury motor coaches = $149,940,000 [1,260 units x $119,000 per Motor Coaches]

Therefore, the amount to use as the annual sales figure when evaluating this project = Sale Value of the campers + Increase in the sale of motor homes - Reduction in the sale of luxury motor coaches

= $446,880,000 + $396,900,000 - $149,940,000

= $693,840,000

“Hence, the amount to use as the annual sales figure when evaluating this project would be $693,840,000”