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Tennis Town can manufacture tennis rackets for $39.75 each in variable raw material costs and $30.35...

Tennis Town can manufacture tennis rackets for $39.75 each in variable raw material costs and $30.35 per racket in variable labor expense.  The rackets sell for $180 each.  Last year, production was 100,000 rackets.  Fixed costs were $1,100,000.  What were total production costs?  What is the marginal cost per pair?  What is the average cost?  If the company is considering a one-time order for an extra 10,000, what is the minimum acceptable total revenue from the order.  

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Answer #1
Total Production cost of 100,000 units:
Material cost (100,000*39.75) 3975000
Labour cost (100,000*30.35) 3035000
Fixed Manufacturing cost 1100000
Total Production cost of 100,000 units: 81,10,000
Marginal Cost per unit:
Material cost per unit 39.75
Labour cost per unit 30.35
Marginal Cost per unit: 70.1
Average cost per unit
Total Production cost of 100,000 units 81,10,000
Divide: Units produced 1,00,000
Average cost per unit 81.1
Minimum acceptable revenue for 10,000 units:
Incremental material cost (10,000*39.75) 397500
Incremental Labour cost (10,000*30.35) 303500
Minimum acceptable revenue for 10,000 units: 701000
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