Question

Winnebagel Corp. currently sells 33,353 motor homes per year at $73,322 each and 9,404 luxury motor coaches per year at $102,392 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 13,316 of these campers per year at $13,878 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?

Topic: Incremental Cash Flows

Answer 1

Net Sales = Sales of new portable camper + Change in sales of motor homes + Change in sales of motor coaches

= [13,316 * $13,878] + [2,400 * $73,322] + [-1,100 * $102,392]

= $184,799,448 + $175,972,800 - $112,631,200 = $248,141,048