Walk Easy Inc., a manufacturer of heel replacement kits for men's shoes, incurs fixed costs of $6 million and unit variable cost of $5. Walk Easy Inc.is considering a switch from manual labour to an automated process.New equipment would cost an additional $4 million per year and it will lower the unit variable cost by $2.How many kits would Walk Easy have to sell at $15 per pair to make $2 million in profits in the next year using the automated process?

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Quizplus · Accepted Answer

The quantity to achieve this profit is calculated as profit + fixed costs divided by price minus unit variable costs, or 2,000,000 + ($6,000,000 + $4,000,000) F1F1F1S1F1F1F10 [15 - ($5 - $2)] = 1,000,000 kits.