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?Group of answer choices$789,100$900,700$27,500$24,000$31,300
Question
Walks Softly sells customized shoes. Currently, it sells 14,800 pairs of shoes annually at an average price of 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?Group of answer choices900,70024,000$31,300
Solution
To calculate the annual sales revenue when evaluating the addition of the lower-priced shoes, we need to consider both the decrease in sales of the higher-priced shoes and the new sales from the lower-priced shoes.
First, let's calculate the current annual sales revenue from the higher-priced shoes: 14,800 pairs * 873,200
Next, let's calculate the decrease in sales from the higher-priced shoes if the lower-priced line is added: 3,500 pairs * 206,500
So, the new annual sales revenue from the higher-priced shoes would be: 206,500 = $666,700
Then, let's calculate the potential sales from the lower-priced shoes: 6,000 pairs * 234,000
Finally, add these two amounts together to get the total annual sales revenue when evaluating the addition of the lower-priced shoes: 234,000 = $900,700
So, the annual sales revenue that should be used when evaluating the addition of the lower-priced shoes is $900,700.
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