An Italian ski manufacturer has determined that the fixed cost of making slalom skis is €1 million and the variable cost is €100 per pair of skis. During normal operations the firm plans to make 20,000 pairs of skis.

a. What is the expected cost of making 20,000 pairs of skis?

b. What are the expected costs of making 30,000 pairs of skis using the fixed and variable costs?

c. Why might the variable and fixed costs be poor predictors of costs when 30,000 pairs of skis are made?