$4$

Andretti Company has a single product called a Dak. The company normally produces and sells $88,000$ Daks each year at a selling price of $$56$ per unit. The company's unit costs at this level of activity are given below:

$\backslash$table$[[$Direct materials,$$8\mathrm{.}50,],[$Direct labor,$11\mathrm{.}00,],[$Variable manufacturing overhead,$1\mathrm{.}90,],[$Fixed manufacturing overhead,$7\mathrm{.}00,($$$616,000$ total$)],[$Variable selling expenses,$3\mathrm{.}70,],[$Fixed selling expenses,$2\mathrm{.}50,($$$220,000$ total$)],[$Total cost per unit,$$34\mathrm{.}60,]]$

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 $110,000$ Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by $25\%$ above the present $88,000$ units each year if it were willing to increase the fixed selling expenses by $$120,000.$ What is the financial advantage $($disadvantage$)$ of investing an additional $$120,000$ in fixed selling expenses?

$4$

Andretti Company has a single product called a Dak. The company normally produces and sells $88,000$ Daks each year at a selling price of $$56$ per unit. The company's unit costs at this level of activity are given below:

$\backslash$table$[[$Direct materials,$$8\mathrm{.}50,],[$Direct labor,$11\mathrm{.}00,],[$Variable manufacturing overhead,$1\mathrm{.}90,],[$Fixed manufacturing overhead,$7\mathrm{.}00,($$$616,000$ total$)],[$Variable selling expenses,$3\mathrm{.}70,],[$Fixed selling expenses,$2\mathrm{.}50,($$$220,000$ total$)],[$Total cost per unit,$$34\mathrm{.}60,]]$

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 $110,000$ Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by $25\%$ above the present $88,000$ units each year if it were willing to increase the fixed selling expenses by $$120,000.$ What is the financial advantage $($disadvantage$)$ of investing an additional $$120,000$ in fixed selling expenses?