K-Too Everwear Corporation can manufacture mountain climbing shoes for $43.03 per pair in variable raw material costs and $25.45 per pair in variable labor expense. The shoes sell for $140 per pair. Last year, production was 110,000 pairs. Fixed costs were $1,150,000.

K-Too Everwear Corporation can manufacture mountain climbing shoes for $43.03 per pair in variable raw material costs and $25.45 per pair in variable labor expense. The shoes sell for $140 per pair. Last year, production was 110,000 pairs. Fixed costs were $1,150,000.

What were total production costs?

Total production cost

$

What is the marginal cost per pair? (Round your answer to 2 decimal places. (e.g., 32.16))

Marginal cost per pair

$

What is the average cost per pair? (Round your answer to 2 decimal places. (e.g., 32.16))

Average cost per pair

$

   

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

$

Explanation:

The total costs include all variable costs and fixed costs. We need to make sure we are including all variable costs for the number of units produced, so:

Total costs = ($43.03 + 25.45)(110,000) + $1,150,000

Total costs = $8,682,800

  

The marginal cost, or cost of producing one more unit, is the total variable cost per unit, so:

Marginal cost = $43.03 + 25.45

Marginal cost = $68.48

The average cost per unit is the total cost of production, divided by the quantity produced, so:

Average cost = Total cost / Total quantity

Average cost = $8,682,800/110,000

Average cost = $78.93

Minimum acceptable total revenue = 9,000($68.48)

Minimum acceptable total revenue = $616,320

Additional units should be produced only if the cost of producing those units can be recovered.