K-Too Everwear Corporation can manufacture mountain climbing shoes for $43.08 pe

Question

K-Too Everwear Corporation can manufacture mountain climbing shoes for $43.08 per pair in variable raw material costs and $25.50 per pair in variable labor expense. The shoes sell for $146 per pair. Last year, production was 140,000 pairs. Fixed costs were $1,195,000.

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 6,000 pairs, what is the minimum acceptable total revenue from the order?

K-Too Everwear Corporation can manufacture mountain climbing shoes for $43.08 per pair in variable raw material costs and $25.50 per pair in variable labor expense. The shoes sell for $146 per pair. Last year, production was 140,000 pairs. Fixed costs were $1,195,000.

Explanation / Answer

1. Total production costs = (43.08 + 25.50) x 140,000 + 1,195,000 = $10,796,200

2. Marginal cost per pair = 43.08 + 25.50 = $68.58

3. Average cost per pair = 10,796,200 / 140,000 = $77.12

4. Minimum acceptable Total Revenue = 68.58 x 6,000 = $411,480

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