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 this case, the incremental sales is the sales from the lower-priced shoes minus the sales lost from the higher-priced shoes. The sales from the lower-priced shoes is 5,000 pairs * $49 per pair = $245,000. The sales lost from the higher-priced shoes is 1,000 pairs * $68 per pair = $68,000. Therefore, the incremental sales is $245,000 - $68,000 = $177,000.