Ace Shoe Company sells heel replacement kits for men's shoes.It has fixed costs of $6 million and unit variable costs of $5 per pair.Suppose a consultant tells Ace it can sell 700,000 heel repair kits,what price must it charge to achieve a profit of $2.5 million?

Question

Quizplus · Accepted Answer

To achieve a profit of $2.5 million, Ace needs to cover its fixed costs of $6 million and the desired profit, totaling $8.5 million. With 700,000 units, the price per unit must be ($8.5 million + (700,000 units * $5 variable cost)) / 700,000 units = $17.14.

Ace Shoe Company Sells Heel Replacement Kits for Men's Shoes