37) Presidential candidate Willard “Mitt” Romney wants to order 10,000 red flip

Question

37) Presidential candidate Willard “Mitt” Romney wants to order 10,000 red flip flops to hand out at campaign stops. The left one will read “I’m for it” while the right one will read “I’m against it.” He contacts Politically Expedient Footwear to make this custom order. Politically Expedient Footwear currently expects to make 1,090,000 flip flips next month with total monthly fixed costs of $8,675,309. Each pair of flip flops involves $1.50 of materials, $0.57 of labor. However, in order to make them red, the company will need to send out the flip flops to a vendor. The vendor charges a flat fee of $50,000 plus $0.06 per unit. If Politically Expedient Footwear prices the order with a 34% markup, what price should it charge per pair of flip flops?
A) $20.22
B) $20.12
C) $13.58
D) $13.48

Explanation / Answer

we have - Total Cost incurred by PEF for 1090000 shoes= $8,675,309 + 1,090,000 x { 1.5 + 0.57} = 10931609 Costs of 10000 units = 10931609/1090000 x 10000 = 100289.991 now, we send them to Vendor, TOtal Costs = 100289.991 + 50000 + 0.06 x 10000 = 150889.99 After mark up, Price = 150889.99 x 1.34 = 202192.5877 Price per pair of flipflops = 202192.5877/10000 = 20.22 Option - A

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