K-Too Everwear Corporation can manufacture mountain climbing shoes for $42.93 pe
ID: 2753841 • Letter: K
Question
K-Too Everwear Corporation can manufacture mountain climbing shoes for $42.93 per pair in variable raw material costs and $25.35 per pair in variable labor expense. The shoes sell for $128 per pair. Last year, production was 120,000 pairs. Fixed costs were $1,060,000.
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 9,000 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.)
What were total production costs? (Do not round intermediate calculations. Round your answer to the nearest whole number, e.g., 32.)
Explanation / Answer
1)What were total production costs?
Total production cost = variable raw material costs + variable labor expense + Fixed costs
Total production cost = 42.93*120000+ 25.35*120000 + 1060000
Total production cost = $ 9,253,600
2)What is the marginal cost per pair?
Marginal cost per pair = variable raw material costs per pair + variable labor expense per pair
Marginal cost per pair = 42.93 + 25.35
Marginal cost per pair = $ 68.28
3) What is the average cost per pair?
Average cost per pair = Total production cost /No of pair produced
Average cost per pair = 9253600/120000
Average cost per pair = $ 77.11
4)If the company is considering a one-time order for an extra 9,000 pairs, what is the minimum acceptable total revenue from the order?
Total revenue = Marginal cost per pair * No of Extra pair
Total revenue = 68.28*9000
Total revenue = $ 614520
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