Answer:
(a) $10,093,300
(b) $57.54
(c) $69.61
(d) $287,700
Explanation:
Given that,
Variable raw material = $33.18 per pair
Variable labor expense = $24.36 per pair
Fixed cost = $1,750,000
Last year, production = 145,000 pairs
(a) Variable cost per unit:
= Variable raw material + Variable labor expense
= $33.18 + $24.36
= $57.54
Total production costs:
= Variable cost per unit × Number of units) + Fixed cost
= ($57.54 × 145,000 pairs) + $1,750,000
= $8,343,300 + $1,750,000
= $10,093,300
(b) Marginal cost per pair:
= The variable cost per pair
= $57.54
(c) Average cost per pair:
= Total Production Cost ÷ Number of units produced
= $10,093,300 ÷ 145,000
= $69.61
(d) Production Cost of additional 5,000 pairs:
= (Variable Cost per pair × Number of additional pairs produced
)
= ($57.54 × 5,000)
= $287,700
Minimum acceptable total revenue is $287,700.
