P $9-21$: Pebble Beach Sandals

Pebble Beach Sandals has designed and patented a luxury golf sandal for both men and women. The unique handmade designs include spikes and cleats to prevent the golfer from slipping during the swing. The sandal is

made from sheepskin, creating comfortable and distinctive footwear sold directly to wholesalers who then sell them to exclusive golf shops for retail prices starting at $$400.$

The sandals are manufactured in the United States and sold in the United States and Europe through two dedicated sales divisions. The United States and EU sales divisions are organized as separate profit centers with

decision rights to set prices in their respective geographic territories. The U$.$S$.$ factory is a cost center that produces the sandals and transfers them to the two sales divisions. Each sales division is charged the full

manufacturing cost of the sandals $($direct labor, direct materials, and overhead$).$ All the sandals produced, both men's and women's styles, and all the various models contain similar amounts of direct labor and direct

material. The only difference between the U$.$S$.$ and EU sandals is the sizing and the size labels stitched into the sandals. Hence, volume in the plant is measured as pairs of sandals manufactured.

This year's manufacturing cost of Pebble Beach Sandals is given by the following table:

$*$Based on expected volume of $17,400$ sandals and fixed manufacturing overhead of $$678,600.$

The U$.$S$.$ plant was built with a capacity to produce between $16,000$ and $20,000$ sandals per year and a long$-$run expected volume of $18,000$ sandals.

The U$.$S$.$ sales division faces the following demand curve for sandals:

$*$Price $=350-(\frac{1}{80})$ quantity.