Answer :
Answer:
502
Explanation:
In this question, we are asked to calculate the number of additional shoes to be sold to cover a $25,000 investment in advertising whilst also maintaining current contribution to the company.
Firstly, we calculate the sum of variable expenses;
This is the sum of shoe boxes and shoes = 1,000 + 250,000 = 251,000
Now, we proceed to get the contribution margin.
Mathematically, contribution margin = Revenue - Total variable expenses = 500,000 - 249,000 = 251,000
The contribution margin per part can be calculated as ;
Contribution Margin/currently selling pairs of shoes= 249,000/5000 = 49.8
The additional parts to be sold = Investment in advertising/contribution margin per shoes
= 25,000/49.8
= 502
How many additional shoes would Katie's Kicks have to sell to cover a $25,000 investment in advertising and maintain their current contribution to the company, assuming they are currently selling 5,000 pairs of shoes will be: 502
First step is to calculate the contribution margin
Revenue $500,000
Less Variable expenses
Shoes $250000
Packaging $1000
Total Variable expenses $251,000
Contribution margin $249,000
($500,000-$251,000)
Second step is to calculate the contribution margin per shoe
Contribution margin per shoes=$249,000/5,000
Contribution margin per shoes=49.8
Now let determine how many additional shoes would Katie's Kicks have to sell
Additional shoes=$25,000/49.8
Additional shoes=502
Inconclusion how many additional shoes would Katie's Kicks have to sell to cover a $25,000 investment in advertising and maintain their current contribution to the company, assuming they are currently selling 5,000 pairs of shoes will be: 502
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