Winnebagel Corp. currently sells 26,400 motor homes per year at $39,600 each, an

Question

Winnebagel Corp. currently sells 26,400 motor homes per year at $39,600 each, and 10,560 luxury motor coaches per year at $74,800 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 16,720 of these campers per year at $10,560 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 3,960 units per year, and reduce the sales of its motor coaches by 792 units per year. Required : What is the amount to use as the annual sales figure when evaluating this project?

Explanation / Answer

Sales due solely to the new product line are:
16720 ($10560) = $176563200

Increased sales of the motor home line occur because of the new product line introduction; thus:
3960 ($39600)=156816000

in new sales is relevant. Erosion of luxury motor coach sales is also due to the new mid-size campers;thus:
792 ($74800) = 59241600 loss in sales
is relevant. The net sales figure to use in evaluating the new line is thus:
= $274137600

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