K-Too Everwear Corporation can manufacture mountain climbing shoes for $11.5 per

Question

K-Too Everwear Corporation can manufacture mountain climbing shoes for $11.5 per pair in variable raw material costs and $18.12 per pair in variable labor expense. The shoes sell for $97 per pair. Last year, production was 140,000 pairs. Fixed costs were $750,000.

Required:

(a) What were total production costs? (Do not round your intermediate calculations.)

(b) What is the marginal cost per pair? (Do not round your intermediate calculations.)

(c) What is the average cost? (Do not round your intermediate calculations.)

(d) If the company is considering a one-time order for an extra 13,000 pairs, what is the minimum acceptable total revenue from the order? (Do not round your intermediate calculations.)

Explanation / Answer

(a) What were total production costs? (Do not round your intermediate calculations.) Ans) Units Produced                  140,000 Variable Material Cost $          1,610,000 140000*$11.50 Variable labour Cost $          2,536,800 140000*$18.12 Fixed Cost $              750,000 $          4,896,800 (b) What is the marginal cost per pair? (Do not round your intermediate calculations.) Variable Material Cost $          1,610,000 140000*$11.50 Variable labour Cost $          2,536,800 140000*$18.12 $          4,146,800 Marginal Cost per pair $                   29.62 4146800/140000 (c) What is the average cost? (Do not round your intermediate calculations.) Ans) Variable Material Cost $          1,610,000 Variable labour Cost $          2,536,800 Fixed Cost $              750,000 $          4,896,800 Units $                   34.98 4896800/140000 (d) If the company is considering a one-time order for an extra 13,000 pairs, what is the minimum acceptable total revenue from the order? (Do not round your intermediate calculations.) Ans) Old Order                  140,000 extra oder                     13,000    153,000 Minimum acceptable revenue Variable Cost Material Cost $          1,759,500 Variable Cost Labour Cost $          2,772,360 Fixed Cost $              750,000 Minimum acceptable revenue $          5,281,860 Total Revenue $        14,841,000 153000*97

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