Hi there! Great question. This is an interesting case prompt. As with all cases, there is rarely a perfectly “right” way to structure your thoughts.

That being said, to start off, I would say something to acknowledge/verify the case's apparently restricted scope (e.g., that you're taking sufficient demand for granted and that this case is all about process, output, and cost).

Then you might want to divide your thinking into two dimensions:

1. The cost structure and contribution margin of each pair of shoes.

2. The process to create a given pair of shoes.

After laying this out, I would tell the interviewer (before waiting for a response) that you'd like to focus on understanding the cost structure.

Here you might want to take a stab at laying out the variable costs and the fixed costs and then ask the interviewer if we know the values of these costs on a aggregate basis (I would try to keep the math aggregate rather than on a “per shoe” basis).

Once you have those values, you can ask how many pairs are produced per year and how much revenue per pair does the client earn. At this point you'll be able to calculate the contribution margin of each pair (Revenue per pair less variable cost per pair), and presumably the client will have the opportunity to make an investment for $XX that will increase fixed costs by $YY and increase output by Z pairs. You should be well-equipped at this point to address the question.

And from here you're off, and I'm sure you'll do great.

(Disclaimer: you never know where cases will go and maybe they'll have you draw out the process to create a pair, e.g., order comes in, leather is ordered, leather is received and cut, shoes are assembled and packaged and sold, etc.)

Hope this helps.

Andrew