Custom Shoes Co. has gathered the following information concerning one model of

Question

Custom Shoes Co. has gathered the following information concerning one model of shoe:

Variable Manufacturing costs...........................$30,000
Variable selling and administrative costs.............$15,000
Fixed manufacturing costs.............................$120,000
Fixed selling and administrative costs................$90,000
Investment..............................................$1,275,000
ROI.................................................................30%
Planned production and sales.......................5,000 pairs

What is the total cost per pair of shoes?

a $30
b $51
c $72
d $126

Explanation / Answer

ROI = 30% Profit before interest and tax / Investment = 0.30 Profit before interest and tax / 1275000 = 0.3 Profit before interest and tax = 1275000 x 0.3 = $382500 Total cost per pair of shoes = (30000 + 15000 + 120000 + 90000)/5000 = $51 Hope this hels!

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