Mountain Gear can manufacture mountain climbing shoes for $37.11 per pair in variable raw material costs and $15.09 per pair in variable labor costs. The shoes sell for $99 per pair. Last year, production was 248,000 pairs and fixed costs were $1.67 million. The maximum production level for the firm given its current assets is 275,000 pairs. What is the minimum acceptable total revenue the company should accept for a one-time order for an extra 12,000 pairs?
A) $611,418
B) $987,600
C) $626,400
D) $947,700
E) $564,100

Question

Quizplus · Accepted Answer

The minimum acceptable total revenue for a one-time order of an extra 12,000 pairs is calculated by adding the variable costs per pair and multiplying by the number of pairs. The variable costs are $37.11 (raw material) + $15.09 (labor) = $52.20 per pair. For 12,000 pairs, the total variable cost is $52.20 * 12,000 = $626,400. This is the minimum revenue needed to cover the variable costs of the extra order, without considering fixed costs since they are already covered by regular production.

Mountain Gear Can Manufacture Mountain Climbing Shoes for $37