Question

If they decided they wanted to invest in a $75,000 advertising campaign in the hopes of generating more sales, how many more pairs of shoes would they have to sell to maintain their current contribution to the organization?

The following cost information pertains to the shoes

            Leather and metals:                                     $25/pair

            Shoe boxes:                                                  $1/pair

            Shoemaker wages:                                      $10/pair

            Advertising & promotion:                            $200,000

            Executive Salaries                                       $300,000

Selling price to boutique:                                        $100.00

Answer 1

Calculation of Margin

Particulars	Amount
Sales	$100
Less: VAriable cost
Leather and metals	$25
Shoe boxes	$1
Shoemaker wages	$10
Contribution /MArgin	$64

Current Fixed Expenses =$200,000+$300,000 =$500,000

Current sales pairs

=$500,000/$64

Current sales pairs =7812.5 that is 7,813/-

Advertisements expenses =$75,000

Advertisement exp.=$200,000

Exective salary =$300,000

Total Fixed Expenses =$575,000

Contribution per Pair =$64

No of pair sold to maintain margin

=Total fixed expenses/ Contribution per pair

=$575,000/$64

=8,984.375 that is 8,985

Extra unit Sales =8985-7813

Pairs =1172 Answer.