K-Too Everwear Corporation can manufacture mountain climbing shoes for $32.15 pe
ID: 2653652 • Letter: K
Question
K-Too Everwear Corporation can manufacture mountain climbing shoes for $32.15 per pair in variable raw material costs and $23.10 per pair in variable labor expense. The shoes sell for $154 per pair. Last year, production was 110,000 pairs. Fixed costs were $1,255,000.
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 5,000 pairs, what is the minimum acceptable total revenue from the order?
K-Too Everwear Corporation can manufacture mountain climbing shoes for $32.15 per pair in variable raw material costs and $23.10 per pair in variable labor expense. The shoes sell for $154 per pair. Last year, production was 110,000 pairs. Fixed costs were $1,255,000.
Explanation / Answer
What were total production costs?
Solution-
The total production cost include all the variable and fixed costs. We including all variable cost for the calculation of number of units produced.....
Total production costs = ($32.15 + $23.10) (110,000) + $1,255,000
Total production costs = $7,332,500
What is the marginal cost per pair?
Solution-
The cost of producing or Marginal cost one (1) more unit is the total variable cost (per unit), So:
Marginal cost = $32.15 + $23.10
Marginal cost per unit = $55.25
What is the average cost per pair?
Solution-
Average cost per pair = Total cost / Total quantity
Average cost per pair =$7,332,500 / 110,000
Average cost per pair = $66.65
If the company is considering a one-time order for an extra 5,000 pairs, what is the minimum acceptable total revenue from the order?
Solution-
Minimum acceptable total revenue = 5,000($55.25)
Minimum acceptable total revenue = $276,250
If the cost of producing those units can be recovered than additional units should be produced only.
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