Winnebagel Corp. currently sells 24,000 motor homes per year at $62,000 each, an

Question

Winnebagel Corp. currently sells 24,000 motor homes per year at $62,000 each, and 9,000 luxury motor coaches per year at $99,000 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 19,000 of these campers per year at $11,000 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 2,500 units per year, and reduce the sales of its motor coaches by 1,200 units per year. What is the amount to use as the annual sales figure when evaluating this project?

Explanation / Answer

Campers sale revenue $       209,000,000 Add: Increase motor homes sales revenue $       155,000,000 Less: Decrease in motor coaches $       118,800,000 Relavant sales value $       245,200,000 Condition: Contribution margin should be same for all 3 products

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