K-Too Everwear Corporation can manufacture mountain climbing shoes for $31.90 pe

Question

K-Too Everwear Corporation can manufacture mountain climbing shoes for $31.90 per pair in variable raw material costs and $22.85 per pair in variable labor expense. The shoes sell for $124 per pair. Last year, production was 100,000 pairs. Fixed costs were $1,030,000.

What were total production costs?

What is the marginal cost per pair? (Round your answer to 2 decimal places. (e.g., 32.16))

What is the average cost per pair? (Round your answer to 2 decimal places. (e.g., 32.16))

If the company is considering a one-time order for an extra 8,000 pairs, what is the minimum acceptable total revenue from the order?

Explanation / Answer

1 Variable Cost-Raw Material $                31.90 2 Variable Cost-Labour 22.85 3 Total Variable (1+2) $                54.75 4 Units Produced                100,000 5 Total Variable Cost (3 x 4) $        5,475,000 6 Fixed Cost $        1,030,000 7 Total Cost of Production (5+6) $        6,505,000 8 Marginal Cost (it is variable cost) $                54.75 9 Average Cost (7/4) $                65.05 10 Minimum Acceptable Revenue for 8000 units assuming a no profit no loss situation (8000 x $ 54.75) $            438,000

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