K-Too Everwear Corporation can manufacture mountain climbing shoes for $43.18 pe
ID: 2736069 • Letter: K
Question
K-Too Everwear Corporation can manufacture mountain climbing shoes for $43.18 per pair in variable raw material costs and $25.60 per pair in variable labor expense. The shoes sell for $158 per pair. Last year, production was 130,000 pairs. Fixed costs were $1,285,000.
What is the marginal cost per pair? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)
What is the average cost per pair? (Do not round intermediate calculations. 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? (Do not round intermediate calculations. Round your answer to the nearest whole number, e.g., 32.)
K-Too Everwear Corporation can manufacture mountain climbing shoes for $43.18 per pair in variable raw material costs and $25.60 per pair in variable labor expense. The shoes sell for $158 per pair. Last year, production was 130,000 pairs. Fixed costs were $1,285,000.
Explanation / Answer
Total production cost = ($43.18 + $25.60) * 130000 + $1,285,000 = $10,226,400
Marginal cost per pair = $43.18 + $25.60 = $68.78 per unit
Average cost per pair = $10,226,400 / 130000 = $78.66 per unit
Total Revenue = 6000 units * $68.78 = $412,680 (for special order marginal cost is the selling price)
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