K-Too Everwear Corporation can manufacture mountain climbing shoes for $42.88 pe

Question

K-Too Everwear Corporation can manufacture mountain climbing shoes for $42.88 per pair in variable raw material costs and $25.30 per pair in variable labor expense. The shoes sell for $122 per pair. Last year, production was 90,000 pairs. Fixed costs were $1,015,000.

  
A) What were total production costs?

B)What is the marginal cost per pair?

C)What is the average cost per pair?

D)If the company is considering a one-time order for an extra 6,000 pairs, what is the minimum acceptable total revenue from the order?

Explanation / Answer

A)total production costs= (42.88+25.30)x90000+1015000= $ 7151200

B)marginal cost per pair= $68.18

C)average cost per pair=7151200/90000= $79.46

D)minimum acceptable total revenue from the order= $7560280

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