Winnebagel Corp currently sells 28.300 motor homes per year at $74,500 each and

Question

Winnebagel Corp currently sells 28.300 motor homes per year at $74,500 each and 7,300 luxury motor coaches per year at $116,500 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 23,300 of these campers per year at $20,500 each. An independent consultant has determined that If Winnebagel introduces the now campers, it should boost the sales of its existing motor homes by 2,900 units per year and reduce the sales of its motor coaches by 880 units per year. Required: What is the amount to use as the annual sales figure when evaluating this project? (Do not round intermediate calculations.)

Explanation / Answer

Sales after introduction of new portable camper :-

23300 campers X $20500= $477650000

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

2900 units X $74500 = $216050000

Erosion of luxury motor coach sales due to the new campers :-

880units X $116500 = $102520000 loss in sales

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

= $477650000 + $216050000 - $102520000

= $591180000

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