Problem:

K-Too Everwear Corporation can manufacture mountain climbing shoes for $42.88 per pair in variable raw material costs and $25.30 per pair in variable labor expense. The shoes sell for $122 per pair. Last year, production was 90,000 pairs. Fixed costs were $1,015,000.

Required:

Question 1: What were total production costs?

Question 2: What is the marginal cost per pair?

Question 3: What is the average cost per pair?

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?

Note: Provide support for your rationale.