Question

Waterway Industries has gathered the following information concerning one model of shoe: Variable manufacturing costs $35000 Variable selling and administrative costs $20000 Fixed manufacturing costs $160000 Fixed selling and administrative costs $120000 Investment $1700000 ROI 20% Planned production and sales 5000 pairs What is the desired ROI per pair of shoes

Answer 1

Answer:

0.004%

Explanation:

The desired ROI per paid of shoes can be calculated using the following formula:

ROI per pair of shoes = ROI / Number of units sold

By putting values we have:

ROI per pair of shoes = 20% / 5000 pairs = 0.004%

This is the return that every shoe pair must achieve to achieve 20% ROI on aggregating.

Answer 2

Answer:

0.004% or $68 of net profit per pair of shoes

Explanation:

return on investment = 20% (net profit / total investment)

since total investment = $1,700,000, then the company's profit = $1,700,000 x 20% = $340,000

if the company is planing on selling 5,000, then each shoe should generate $340,000 / 5,000 shoes = $68 in net profit

ROI per pair of shoes = $68 / $1,700,000 = 0.00004 x 100 = 0.004%