Question

Winnebagel Corp. currently sells motor homes at $73,000 each. The company wants to introduce a new portable camper to fill out its product line. It hopes to sell 25,000 of these campers per year at $19,000 each. The marketing department of the firm has forecasted that the sale of its motor homes will be reduced by 1500 when the new portable camper will be introduced. However, 500 out of such loss in motor homes (1500) will move to the firm’s competitor no matter whether the new portable camper is introduced or not. What is the erosion effect on the sale of motor homes by introducing the new portable camper (in millions)? Group of answer choices A.365.5 B.109.5 C.73 D.36.5

Answer 1

Answer: C.73

Step-by-step explanation:

It is stated that 1,500 less motor homes will be sold once Winnebagel Corp. introduces it's new Portable Camper.

However it also states that 500 out of this 1,500 will be lost regardless of if the Portable Camper is introduced or not.

So that means that the actual erosion effect on the sale of motor homes is,

= 1,500 - 500

= 1,000 mobile homes.

Since each home is sold for $73,000 then the Erosion effect will be,

= 73,000 * 1,000

= $73,000,000

$73 million is the erosion effect on the sale of motor homes by introducing the new portable camper so Option C is correct.