Question

Winnebagel Corp. currently sells 22,800 motor homes per year at $34,200 each, and 9,120 luxury motor coaches per year at $64,600 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 14,440 of these campers per year at $9,120 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 3,420 units per year, and reduce the sales of its motor coaches by 684 units per year.

  

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

Multiple Choice

• $204,470,400

• $194,246,880

• $292,843,200

• $214,693,920

• $131,692,800

Answer 1

a. $204,470,400

Sales due solely to the new product line = 14,440 * $9,120 = $131,692,800

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

3,420 * $34,200 = $116,964,000

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

684 * $64,600 = $44,186,400 loss in sales

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

Net sales = $131,692,800 + $116,964,000 - $44,186,400

Net sales = $204,470,400