Question: Floating Homes, Inc., is a manufacturer of
Floating Homes, Inc., is a manufacturer of luxury pontoon and houseboats that sell for $40,000 to $100,000. To estimate its revenues for the following year, Floating Homes divides its boat sales into three categories based on selling price (high, medium, and low) and estimates the number of units it expects to sell under three different economic scenarios. These scenarios include a recession (Scenario I), a continuation of current conditions in which the economy is level or unchanged (Scenario II), and a strong economy (Scenario III). These estimates are as follows:
Using these estimates, calculate the expected revenue for Floating Homes, Inc., for the following year.
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Scenario II: Level Economy Strong Economy Scenario I: Scenario III: Recession Probability 25% 50% 25% High-Priced Boats Category Unit sales 50 400 1,000 Average price per unit Medium-Priced Boats Category $80,000 $90,000 $95,000 Unit sales 100 800 3,000 $60,000 Average price per unit Low-Priced Boats Category $70,000 $80,000 Unit sales 200 1,500 5,000 Average price per unit $50,000 $50,000 $50,000
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