Question

Walks Softly sells customized shoes. Currently, it sells 14,800 pairs of shoes annually at an average price of $59 a pair. It is considering adding a lower-priced line of shoes that will be priced at $39 a pair. Walks Softly estimates it can sell 6,000 pairs of the lower-priced shoes but will sell 3,500 less pairs of the higher-priced shoes by doing so. What annual sales revenue should be used when evaluating the addition of the lower-priced shoes?

Answer 1

Answer:

New Sales Revenue = $900,700

Old Sales Revenue = $873,200

Net expected increase = $27,500

Explanation:

As for the information provided:

Current sales revenue = $59 $\times$ 14,800 = $873,200

If the sales is also made of lower price shoes, then the sales revenue shall be as follows:

Lower price = 6,000 $\times$ $39 = $234,000

High price = $59 $\times$ (14,800 - 3,500) = $666,700

Total revenue = $900,700

Since the revenue is more than the original revenue, from sales of lower price shoes also.

The sales shall be made.

Therefore, while evaluating such proposal sales revenue used shall be:

$900,700 and the old revenue = $873,200

The difference increase in revenue = $27,500