Question

Winnebagel Corp. currently sells 31,172 motor homes per year at $67,722 each and 10,821 luxury motor coaches per year at $102,838 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 23,464 of these campers per year at $13,235 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 2,400 units per year and reduce the sales of its motor coaches by 1,100 units per year. What is the amount to use as the annual sales figure when evaluating this project? (Round answer to 0 decimal places. Do not round intermediate calculations)

Answer 1

The annual sales figure for evaluating Winnebagel Corp's project, after considering the changes in existing sales and projected camper sales, is $360,007,040.

To calculate the annual sales figure for evaluating Winnebagel Corp's project, we consider the changes in sales volumes of existing products due to the introduction of the new portable campers and the projected sales of the new product. First, we determine the additional revenue from the increased motor home sales, which is

2,400 units × $67,722 per unit. We then subtract the lost revenue from the decrease in luxury motor coach sales, which is 1,100 units × $102,838 per unit. Lastly, we add the projected sales from the new portable campers, which is

23,464 units × $13,235 per unit. Therefore, the annual sales figure is the sum of the additional motor home revenue, the portable camper sales, minus the reduced motor coach sales.

The calculations are as follows:

• Increased motor home sales: 2,400 units × $67,722 = $162,532,800
• Decreased motor coach sales: 1,100 units × $102,838 = $113,121,800 (reduced revenue)
• Projected portable camper sales: 23,464 units × $13,235 = $310,586,040

Adding and subtracting these figures:

$162,532,800 - $113,121,800 + $310,586,040 = $360,007,040

This is the annual sales figure to use when evaluating the project.