Andretti Company has a single product called a Dak. The company normally produces and sells 82,000...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Andretti Company has a single product called a Dak. The company normally produces and sells 82,000 Daks each year at a selling price of $62 per unit. The company's unit costs at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total cost per unit $ 7.50 9.00 3.10 6.00 ($492,000 total) 1.70 3.50 ($287,000 total) $ 30.80 A number of questions relating to the production and sale of Daks follow. Each question is Independent. Required: 1-a. Assume that Andretti Company has sufficient capacity to produce 98,400 Daks each year without any Increase in fixed manufacturing overhead costs. The company could increase its unit sales by 20% above the present 82,000 units each year if it were willing to Increase the fixed selling expenses by $140,000. What is the financial advantage (disadvantage) of Investing an additional $140,000 in fixed selling expenses? 1-b. Would the additional Investment be justified? 2. Assume again that Andretti Company has sufficient capacity to produce 98,400 Daks each year. A customer in a foreign market wants to purchase 16,400 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $2.70 per unit and an additional $11,480 for permits and licenses. The only selling costs that would be associated with the order would be $2.10 per unit shipping cost. What is the break-even price per unit on this order? 3. The company has 600 Daks on hand that have some Irregularities and are therefore considered to be "seconds." Due to the Irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What Is the unit cost figure that is relevant for setting a minimum selling price? 4. Due to a strike in its supplier's plant, Andretti Company is unable to purchase more material for the production of Daks. The strike Is expected to last for two months. Andretti Company has enough material on hand to operate at 25% of normal levels for the two-month period. As an alternative, Andretti could close its plant down entirely for the two months. If the plant were closed, fixed manufacturing overhead costs would continue at 40% of their normal level during the two-month period and the fixed selling expenses would be reduced by 20% during the two-month period. a. How much total contribution margin will Andretti forgo if it closes the plant for two months? b. How much total fixed cost will the company avoid if it closes the plant for two months? c. What is the financial advantage (disadvantage) of closing the plant for the two-month period? d. Should Andretti close the plant for two months? 5. An outside manufacturer has offered to produce 82,000 Daks and ship them directly to Andretti's customers. If Andretti Company accepts this offer, the facilities that it uses to produce Daks would be idle; however, fixed manufacturing overhead costs would be reduced by 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two- thirds of their present amount. What Is Andretti's avoidable cost per unit that it should compare to the price quoted by the outside manufacturer? Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 Req 3 Req 4A to 4C Req 4D Req 5 Assume that Andretti Company has sufficient capacity to produce 98,400 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 20% above the present 82,000 units each year if it were willing to increase the fixed selling expenses by $140,000. What is the financial advantage (disadvantage) of investing an additional $140,000 in fixed selling expenses? Andretti Company has a single product called a Dak. The company normally produces and sells 82,000 Daks each year at a selling price of $62 per unit. The company's unit costs at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total cost per unit $ 7.50 9.00 3.10 6.00 ($492,000 total) 1.70 3.50 ($287,000 total) $ 30.80 A number of questions relating to the production and sale of Daks follow. Each question is Independent. Required: 1-a. Assume that Andretti Company has sufficient capacity to produce 98,400 Daks each year without any Increase in fixed manufacturing overhead costs. The company could increase its unit sales by 20% above the present 82,000 units each year if it were willing to Increase the fixed selling expenses by $140,000. What is the financial advantage (disadvantage) of Investing an additional $140,000 in fixed selling expenses? 1-b. Would the additional Investment be justified? 2. Assume again that Andretti Company has sufficient capacity to produce 98,400 Daks each year. A customer in a foreign market wants to purchase 16,400 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $2.70 per unit and an additional $11,480 for permits and licenses. The only selling costs that would be associated with the order would be $2.10 per unit shipping cost. What is the break-even price per unit on this order? 3. The company has 600 Daks on hand that have some Irregularities and are therefore considered to be "seconds." Due to the Irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What Is the unit cost figure that is relevant for setting a minimum selling price? 4. Due to a strike in its supplier's plant, Andretti Company is unable to purchase more material for the production of Daks. The strike Is expected to last for two months. Andretti Company has enough material on hand to operate at 25% of normal levels for the two-month period. As an alternative, Andretti could close its plant down entirely for the two months. If the plant were closed, fixed manufacturing overhead costs would continue at 40% of their normal level during the two-month period and the fixed selling expenses would be reduced by 20% during the two-month period. a. How much total contribution margin will Andretti forgo if it closes the plant for two months? b. How much total fixed cost will the company avoid if it closes the plant for two months? c. What is the financial advantage (disadvantage) of closing the plant for the two-month period? d. Should Andretti close the plant for two months? 5. An outside manufacturer has offered to produce 82,000 Daks and ship them directly to Andretti's customers. If Andretti Company accepts this offer, the facilities that it uses to produce Daks would be idle; however, fixed manufacturing overhead costs would be reduced by 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two- thirds of their present amount. What Is Andretti's avoidable cost per unit that it should compare to the price quoted by the outside manufacturer? Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 Req 3 Req 4A to 4C Req 4D Req 5 Assume that Andretti Company has sufficient capacity to produce 98,400 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 20% above the present 82,000 units each year if it were willing to increase the fixed selling expenses by $140,000. What is the financial advantage (disadvantage) of investing an additional $140,000 in fixed selling expenses?
Expert Answer:
Answer rating: 100% (QA)
1a To determine the financial advantage or disadvantage of investing an additional 140000 in fixed s... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
Posted Date:
Students also viewed these accounting questions
-
Required information Use the following information for the Problems below. (Algo) [The following information applies to the questions displayed below.] Golden Corporation's current year income...
-
REQUIRED Calculate the economic order quantity for the year. (4 marks) INFORMATION Suntan Limited produces a product which has a steady monthly demand of 4 000 units. The product requires a component...
-
Pete's Power Pizzas sells a chocolate/tofu filled pastry. Pete's currently sells this pastry for $11.01, and makes it for a variable cost of $6.82 per pie. A drop in cocoa prices will reduce variable...
-
The Sales Discounts account is a contra account to which of the following accounts? Cost of Goods Sold Sales Returns and Allowances Purchases Discounts Sales Revenue
-
Define the concept of centralization and discuss the conditions favouring the centralization of a company's international operations.
-
Consider a channel that can lose packets but has a maximum delay that is known. Modify protocol rdt2. 1 to include sender timeout and retransmit. Informally argue why your protocol can communicate...
-
What amount of income tax is withheld from the salary of an employee who is single with three withholding allowances and earnings of $675 in a week?
-
Kitty Wonderland (KW) makes toys for cats and kittens. KWs managers have recently learned that they can calculate the average waiting time for an order from the time an order is received and the time...
-
4). a-.01 S Sample size Number of full-time students a) Is there any evidence that the average salary for XYZ is higher than 43? Ho H Decision Critical Value(s) XYZ 48 15 49 12 Computed Value(s) Graph
-
1) Let to > 0 and X be a random variable such that E(etX) < co for all t R with It| < to. Let 1(t)=1og(E(etX)) for ltl < to. From one of our theorems in class, we know that y has derivatives of all...
-
_____ focuses on designing jobs around the concepts of task specialization, skill simplification, and repetition.
-
Is illegal immigration really hurting this country, when most illegal immigrants take jobs that Americans dont want to do anyway?
-
_____ focuses on minimizing the physical strain on the worker by structuring the physical work environment around the way the body works.
-
Do we really need all of the laws that protect the equal employment opportunities of different groups (age, military veterans, pregnant women, etc.)? Why, or why not?
-
Are there situations in which working in teams might be demotivating? How could this occur?
-
Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $180,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the...
-
Determine which of the following limits exist. Compute the limits that exist. lim x-0 1- + 3x X
-
Antonio Rossi set up a part-time business on 1 November 2004 buying and selling second-hand sports cars. On 1 November 2004 he commenced business with $66,000 which he immediately used to purchase...
-
Why is it necessary for financial reporting to be subject to (a) mandatory control and (b) statutory control?
-
How is it possible to make shareholders aware of the significance of the exercise of judgement by directors which can turn profits of 6m into losses of 2m?
Study smarter with the SolutionInn App