Question

Larson, Inc., manufactures backpacks. Last year, it sold 102,000 of its basic model for $20 per unit. The company estimates that this volume represents a 30 percent share of the current market. The market is expected to increase by 10 percent next year. Marketing specialists have determined that as a result of new competition, the company’s market share will fall to 25 percent (of this larger market). Due to changes in prices, the new price for the backpacks will be $17 per unit. This new price is expected to be in line with the competition and have no effect on the volume estimates.

Required:

Estimate Larson's sales revenues from this model of backpack for the coming year.

Answer 1

$1,589,500

Step-by-step explanation:

The computation of the estimated sales revenue is shown below:

= Number of units sold × increased percentage ÷ current market percentage × falling percentage × new price for the backpacks

= 102,000 × 110 ÷ 30 × 25% × $17

= $1,589,500

The increased percentage would be

= 100 + 10

= 110

Simply we ignore the selling price per unit and consider all other items which are mentioned in the question