Question

Winnebagel Corp. currently sells 28084 motor homes per year at $64612 each, and 12475 luxury motor coaches per year at $107921 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 25171 of these campers per year at $11733 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 2094 units per year, and reduce the sales of its motor coaches by 1151 units per year. What is the annual sales figure you should use when evaluating this project? (Round your final answer to the nearest dollar amount. Omit the "$" sign and commas in your response. For example, $123,456.78 should be entered as 123457.)

Answer 1

While evaluating new project, the company should use incremental sales into consideration for decision making. Incremental sales includes sales of new product and changes in sales of existing product.

Motor Homes:

Increase in unit sales = 2,094

Increase in sales = Increase in unit sales * Selling price per unit
Increase in sales = 2,094 * $64,612
Increase in sales = $135,297,528

Motor Coaches:

Decrease in unit sales = 1,151

Decrease in sales = Decrease in unit sales * Selling price per unit
Decrease in sales = 1,151 * $107,921
Decrease in sales = $124,217,071

Portable Camper:

Unit sales = 25,171

Sales = Unit sales * Selling price per unit
Sales = 25,171 * $11,733
Sales = $295,331,343

Incremental sales = Total sales of Portable Camper + Increase in sales of Motor Homes - Decrease in sales of Motor Coaches
Incremental sales = $295,331,343 + $135,297,528 - $124,217,071
Incremental sales = $306,411,800

So, you should use $306,411,800 as annual sales figure while evaluating this project.