Question

Winn Corp. currently sells 9,820 motor homes per year at $45,500 each, and 3,680 luxury motor coaches per year at $89,700 each. The company wants to introduce a new portable camper to fill out its product line. It hopes to sell 3,758 of these campers per year at $14,750 each. An independent consultant has determined that if the new campers are introduced, sales of its existing motor homes will most likely increase by 250 units per year while the sales of its luxury motor coaches will probably decline by 368 units per year. What is the incremental sales amount that should be used when evaluating the portable camper project?

Answer 1

Answer:

$33,795,900

Explanation:

The following steps should be taken, first determine the sales from new product line, fine the positive synergy between the consultant estimate and determine the erosion.

1. Sales from New Product Line = 3,758 campers x $14,750 each = $55,430,500

2. Synergy = 250 units x $45,500 each = $113,75,000 increase in sales

3. Erosion = 368 units per year x $89,700 each = $33,009,600 decline in sales

Incremental sales amount is,

Net Sales = Sales from new product line + Synergy - Erosion

Incremental sales amount=55,430,500 + 113,75,000 - 33,009,600= $33,795,900

Answer 2

Answer:

the incremental sales will be in the maginitude of $33,795,900

Explanation:

Sales revenue 3,758 x $14,750 each =  55,430,500

Lost revenue on luxury motor:

368 x $ 89,700 = 33.009.600‬

Additional revenue on home motor:

250 x $ 45,500 = 11.375.000‬

Net impact:

55,430,500 + 11,375,000 - 33,009,600 = 33,795,900