Walks Softly, Inc.sells customized shoes.Currently, it sells 10,000 pairs of shoes annually at an average price of €68 a pair.It is considering adding a lower-priced line of shoes which sell for €49
A pair.Walks Softly estimates it can sell 5,000 pairs of the lower-priced shoes but will sell 1,000 less
Pairs of the higher-priced shoes by doing so.What is the amount of the sales that should be used
When evaluating the addition of the lower-priced shoes?

Question

Quizplus · Accepted Answer

The sales that should be used when evaluating the addition of the lower-priced shoes is the incremental sales, which is the difference in sales between the two scenarios. In the first scenario, Walks Softly sells 10,000 pairs of shoes at an average price of €68 a pair, for a total of €680,000 in sales. In the second scenario, Walks Softly sells 5,000 pairs of the lower-priced shoes at €49 a pair, for a total of €245,000 in sales, and 9,000 pairs of the higher-priced shoes at €68 a pair, for a total of €612,000 in sales. The incremental sales is therefore €245,000 + €612,000 - €680,000 = €177,000.