Answer:
(a) Total cost of production= $5,736,500
(b) Marginal costs= $42.65
(c) Average cost= $52.15
(d) Revenue= $298,550
Step-by-step explanation:
First of all we have to write down the parameters given in the question
K-Too Everwear corporation can manufacture mountain climbing shoes at the rate of $25.70 for one pair in variable raw materials costs
This same shoes can be manufactured at the rate of $16.95 for one pair in variable labor expenses
The shoe is sold for $126 for a pair
The quantity of shoes produced last year was 110,000 pairs
Fixed cost are $1,045,000
(a) The total cost of production can be calculated as follows
($25.70+$16.95)(110,000)+$1,045,000
= ($42.65)(110,000) + $1,045,000
= $4,691,500 + $1,045,000
= $5,736,500
Total cost of production = $5,736,500
(b) The Marginal costs can be calculated as follows
= $25.70 + $16.95
= $42.65
Marginal costs= $42.65
(c) The average cost per pair can be calculated as follows
Total cost of production/Total quantity
= $5,736,500/110,000
= $52.15
Average cost= $52.15
(d) The minimum total revenue can be calculated as follows
= 7,000× $42.65
= $298,550
Total revenue = $298,550