A domestic shoe company distributes running shoes and tennis shoes for $95 per p

Question

A domestic shoe company distributes running shoes and tennis shoes for $95 per pair.  The marginal cost of producing a pair of running shoes is $60, and the marginal cost of producing a pair of tennis shoes is $45.  A Chinese retailer offers to purchase running shoes for $55 per pair and tennis shoes for $55 per pair for distribution in China. Should the shoe company sell any shoes to the Chinese retailer? (Ignore any potential issues of bundling the two types of shoes together as part of the sale and any competitive effects that international sales might hace on current domestic sales).  

Explanation / Answer

contribution margin for domestic is (95-60)+(95-45)=85
contribution margin for china = 55*2-105= 5
shoe company should not sell any shoes to the Chinese retailer   

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