Question

If the cost of labor in the united states is five times greater than the cost of labor in
asia, how much would it cost to produce a pair of nike athletic shoes in the united
states? assuming that all other costs remain the same and the shoes would still sell for
$65 a pair, what would be the percentage difference in profit realized

Answer 1

Therefore the percentage difference in profit realized will be 66.67 % .

What is Profit ?

Profit, is net income earned after subtracting all dollar costs from total revenue.

In effect, it shows the amount of money a firm has left over after deducting the explicit costs of running the business.

Suppose all the charges for making the shoes is x (other than the labour charge)

Labor charge in Asia is y

And as given in the question Labor Charge in United States is 5y

The final cost off the shoes is $65

Profit in asia = (65-x-y)

Profit in United States = (65-x-5y)

Let's use trial and error method to understand this

suppose the making cost is x = $10  and the labor charge in asia is $5 per shoes so

Profit in Asia = 65-10-5 = $50

Profit in United Stated = 65- 10-25 = $30

the percentage difference in profit realized

= (50-30) * 100 /30

= 2000/30 = 200/3 = 66.67%

Therefore the percentage difference in profit realized will be 66.67 % .

To know more about Profit

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