Question

Winnebagel Corp. currently sells 38400 motor homes per year at $48500 each, and 10900 luxury motor coaches per year at $119600 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 22500 of these campers per year at $24500 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 2400 units per year, and reduce the sales of its motor coaches by 1900 units per year. What is the amount to use as the annual sales figure when evaluating this project?

Answer 1

Solution:
	Net Sales                                $	440,410,000
Working Notes:
	The amount to use as the annual sales figure when evaluating this project, should be relevant sales only , not the sales that will occur after & before the effect of this project.
	That is the only sale value of new portable camper and increased sale value of motor homes and decreased sale value of motor coaches
	Product	Quantity	Price	Sales
	New portable camper	22,500	$24,500	$551,250,000
	Add: Increase in motor homes	2400	$48,500	$116,400,000
	Less: Decrease in motor coaches	-1,900	$119,600	($227,240,000)
			Net Sales	$440,410,000
Please feel free to ask if anything about above solution in comment section of the question.