Winnebagel Corp. currently sells 28,000 motor homes per year at $66,000 each, an

Question

Winnebagel Corp. currently sells 28,000 motor homes per year at $66,000 each, and 11,000 luxury motor coaches per year at $103,000 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 23,000 of these campers per year at $13,000 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 2,400 units per year, and reduce the sales of its motor coaches by 1,100 units per year. What is the amount to use as the annual sales figure when evaluating this project? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.)

Explanation / Answer

Current Unit Sale Motor Homes = 28000

Current Unit Sale of Luxury Motor Coaches = 11000

After the intorduction of new portable crampers,

Expected No of new portable campers to be sold = 23000

Price of the camper = $13,000

Expected Increase in Unit Sale of Motor Homes = 2400

Expected Reduction in Unit Sale of Luxury Motor Coaches = 1100

Price of a Motor Home = $66,000

Price of a Luxury Motor Coach = $103,000

To evaluate the project , we will have to use the incremental sales figure, thats is, sales due to new camper, increase in salesof the motor homes and decrease in the sales of luxury motor coaches.

Amount to use as the annual sales figure

                    = 23000 * 13000 + 2400 * 66000 - 1100 * 103000 = $344,100,000

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