3 10 points eBook Print References Problem 13-19 (Algo) Relevant Cost Analysis in a Variety of Situations [LO13-2, LO13-3, LO13-4] Andretti Company has a single product called a Dak. The company normally produces and sells 89,000 Daks each year at a selling price of $64 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 $8.50 10.00 2.60 3.00 ($267,000 total) 3.70 3.50 ($311,500 total) $31.30 A number of questions relating to the production and sale of Daks follow. Each question is Independent. Required: 1-a. Assume Andretti Company has sufficient capacity to produce 111,250 Daks each year without any increase in foxed manufacturing overhead costs. The company could increase its unit sales by 25% above the present 89,000 units each year if it increased fixed selling expenses by $150,000. What is the financial advantage (disadvantage) of investing an additional $150,000 in fixed selling expenses? 1-b. Would the additional investment be justified? 2. Assume Andretti Company has sufficient capacity to produce 111,250 Daks each year. A customer in a foreign market wants to purchase 22,250 Daks. If Andrett! accepts this order, it would pay Import duties on the Daks of $2.70 per unit and an additional $11,125 for permits and licenses. The only selling costs associated with the order would be $2.00 per unit shipping cost. What is the break- even price per unit on this order? 3. The company has 700 Daks on hand with some irregularities that make it impossible to sell them at the normal price through regular distribution channels. What unit cost figure is relevant for setting a minimum selling price to liquidate these units? 4. Due to a strike in its supplier's plant, Andrett! Company is unable to purchase more material for the production of Daks. The strike is expected to lost 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 35% of their normal level during the two-month period and the foxed 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 offered to produce 89,000 Daks and ship them directly to Andrett'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 75% 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 Andrett's avoidable cost per unit it should compare to the price quoted by the outside manufacturer?