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 750,000 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 750,000 units, the price per unit must be: (Fixed Costs + Desired Profit) / Units + Variable Cost = ($6,000,000 + $2,500,000) / 750,000 + $5 = $16.33.

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