K-Too Everwear Corporation can manufacture mountain climbing shoes for $32.05 per pair in variable raw material costs and $23.00 per pair in variable labor expenses. The shoes sell for $142 per pair. Last year, production was 120,000 pairs. Fixed costs were $1,165,000. a. What were total production costs? b. What is the marginal cost per pair? c. What is the average cost per pair? d. 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 $32.05 per pair in variable raw material costs and $23.00 per pair in variable labor expenses. The shoes sell for $142 per pair. Last year, production was 120,000 pairs. Fixed costs were $1,165,000. a. What were total production costs? b. What is the marginal cost per pair? c. What is the average cost per pair? d. 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?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 58P: Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and...

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Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and trim kits. Fixed cost equals 146,000. Each door handle sells for 12 and has variable cost of 9; each trim kit sells for 8 and has variable cost of 5. Required: 1. What are the contribution margin per unit and the contribution margin ratio for door handles and for trim kits? 2. If Polaris sells 20,000 door handles and 40,000 trim kits, what is the operating income? 3. How many door handles and how many trim kits must be sold for Polaris to break even? 4. CONCEPTUAL CONNECTION Assume that Polaris has the opportunity to rearrange its plant to produce only trim kits. If this is done, fixed costs will decrease by 35,000, and 70,000 trim kits can be produced and sold. Is this a good idea? Explain.
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