Ace Shoe Co

question 157

Multiple Choice

Ace Shoe Co.has fixed costs of $6 million and unit variable costs of $5 per pair.Suppose a consultant tells Ace it can sell 700,000 pairs of shoes,it should seek a profit of $2.5 million,and it should select an appropriate price to meet that 700,000 target.What potential error is the consultant making?

• A)assuming that fixed costs are independent of price
• B)assuming that units sold is independent of price
• C)assuming that some fixed costs are variable
• D)assuming that some variable costs are fixed