Shoe CoHas Fixed Costs of $6 Million and Unit Variable Costs

question 255

Multiple Choice

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,thus earning a profit of $2.5 million.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
• E) assuming that variable costs are independent of price

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