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Relevant amount of sales for cash flows

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9-2. Relevant Cash Flows. Winnebagel Corp. currently sells 19,000 motor homes per
year at $50,000 each, and 6,000 luxury motor coaches per year at $90,000 each. The
company wants to introduce a new portable camper to fill out its product line; it
hopes to sell 12,000 of these campers per year at $15,000 each. An independent
consultant has determined that if Winnebagel introduces the new campers, it should
boost the sales of its existing motor homes by 2,000 units per year, and reduce the
sales of its motor coaches by 1,000 units per year. What is the amount to use as the
annual sales figure when evaluating this project? Why?

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Solution Summary

The solution explains how to calculate the relevant sales figure which would be used in incremental cash flows

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Present Situation is 19000 motor homes at 50,000 and 6000 luxury at 90,000.
With the introduction of camper, the sales would be 12,000 at 15,000 + ...

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