Question

Sheridan Company has gathered the following information concerning one model of shoe: Variable manufacturing costs $32000 Variable selling and administrative costs $16000 Fixed manufacturing costs $160000 Fixed selling and administrative costs $120000 Investment $1800000 ROI 50% Planned production and sales 5000 pairs What is the desired ROI per pair of shoes?

Answer 1

To find the desired ROI per pair of shoes, divide the total investment by the planned production and sales and the value is $65.60 per pair.

Step-by-step explanation:

To find the desired ROI per pair of shoes, we need to calculate the total investment in the shoes and divide it by the planned production and sales.

The total investment includes both fixed and variable costs. In this case, the fixed costs are $160,000 for manufacturing and $120,000 for selling and administrative expenses, which sum up to $280,000.

The variable costs are $32,000 for manufacturing and $16,000 for selling and administrative expenses, which sum up to $48,000.

Therefore, the total investment is $280,000 + $48,000 = $328,000.

Since the desired ROI is 50%, we can calculate the desired ROI per pair of shoes by dividing the total investment by the planned production and sales: $328,000 / 5,000 pairs = $65.60 per pair.

Answer 2

$180 per pair

Step-by-step explanation:

Return on Investment (ROI) is the ratio of net earning on the investment. It is used for the financial decision to compare different companies total earning over amount invested by the company.

Return on Investment = Net Income / Investment

As per given Condition

50% = Net Income / $1,800,000

Net income = $1,800,000 x 50%

Net income = $900,000

Net Income per pair of shoes = $900,000 / 5,000 pairs = $180 per pair