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.
Part A:
What is the erosion effect on the sale of motor homes by introducing the new portable camper (in millions)?
Part B:
What is the incremental revenue for introducing the new portable camper (in millions)?