Problem:
Everwear Corporation can manufacture mountain climbing shoes for $14.15 per pair in variable raw material costs and $18.37 per pair in variable labor expense. The shoes sell for $107 per pair. Last year, production was 160,000 pairs. Fixed costs were $880,000.
Task:
Question 1: What were total production costs? (Do not round your intermediate calculations.)
Question 2: What is the marginal cost per pair? (Do not round your intermediate calculations.)
Question 3: What is the average cost? (Do not round your intermediate calculations.)
Question 4: 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 your intermediate calculations.) HINT: Does the company need to recover marginal or average cost per unit?
Note: Explain all calculation and formulas.