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.Ace would like to earn a profit of $2 million; how many pairs must they sell at a price of $15?

Question

Quizplus · Accepted Answer

To earn a profit of $2 million, Shoe Company needs to cover their fixed costs ($6 million) and variable costs per unit ($5), plus the desired profit of $2 million.

Let's represent the number of pairs of heel replacement kits sold as "Q".

Thus, the equation for total revenue can be written as:

Total Revenue = Price x Quantity (Q)

Since the price is given as $15, the equation becomes:

Total Revenue = $15Q

The equation for total cost can be written as:

Total Cost = Fixed Costs + Variable Costs per unit x Quantity (Q)

Plugging in the given values:

Total Cost = $6 million + $5Q

We know that Ace wants to earn a profit of $2 million, so we can write:

Total Revenue - Total Cost = Desired Profit

$15Q - ($6 million + $5Q) = $2 million

Simplifying:

$10Q = $8 million

Q = 800,000

Therefore, Shoe Company needs to sell 800,000 pairs of heel replacement kits at a price of $15 to earn a profit of $2 million.

The correct answer is D, 800,000 kits.

Shoe Company Sells Heel Replacement Kits for Men's Shoes