Question

Green Woods sells specialty equipment for mountain climbers. Its sales for last year included $238,000 of tents and $411,000 of climbing gear. For next year, management has decided to sell specialty sleeping bags also. As a result of this change, sales projections for next year are $264,000 of tents, $426,000 of climbing gear, and $51,000 of sleeping bags. How much of next year's sales are derived from the side effects of adding the new product to its sales offerings?

Answer 1

By $41,000 the next year's sales are derived from the side effects of adding the new product to its sales offerings.

Step-by-step explanation:

For calculating the sale for next year, the tent expense and climbing gear is to be considered. With the help of these, the next year sale from the side effects can be derived. The sleeping bag cost is not to be considered so it would not be taken for calculation. The computation is shown below:

= (Tent Expense Next year + Climbing gear Next year ) - (Tent Expense Previous year + Climbing gear Previous year )

= ( $264,000 + $426,000) - ( $238,000 + $411,000)

= ($690,000 - $649,000)

= $41,000

Thus, by $41,000 the next year's sales are derived from the side effects of adding the new product to its sales offerings.