Andres Company has a single product called Dok. The company normally produces and sells 84000 Dex each year to selling price of $62 per unit. The company'sunt costs at this level of s y are given below $8.52 Direct war als Direct Labor Varie t uring overtad Fixed ufacturing cread Variable selling expenses 5.ee ($420,cae total) 4.ee ($336,de total) $34.70 Total cost per unit A number of questions relating to the production and sale of Dake follow. Each questions independent Required: 1- Assume that Andet Company has sufficient capacity to produce 109,200 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 30% above the present 4,000 units each year were willing to increase the fixed selling expenses by $130.000. What is the financial advantage disadvantage of investing an additional $130,000 in fixed selling expenses 1b. Would the additional Investment bestified 2. Assume again that Andrett Company has sufficient capacity to produce 109,200 Daks each year. A customer in a foreign market wants to purchase 25,200 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $3.70 per unit and on additional $15,120 for permits and licenses. The only selling costs that would be sociated with the order would be $130 per unit shipping cost What is the break-even price per unit on this order! 3. The company has 700 Daks on hand that have some irregulares and are therefore considered to be 'seconds. Due to the Irregularities will be impossible to sell these units at the normal price through regular distribution channels. What the unit cost digure that is relevant for setting a minimum selling price! 4. Due to a strike in its supple's plant, Andrett Company is unable to purchase more material for the producon of Daks. The strikes expected to est fortwo months. Andrer Company has enough material on hand to operate at 25% of normal levels for the two month period. As an alternative. Andrett could close its plant down entirely for the two months, the plant were closed. Fredmanufacturing overhead costs would continue at 30% of their normal level during the two month period and the fixed selling expenses would be reduced by 20% during the two month period . How much total contributon marginwill Andrett forgot closes the plant for tvo months b. How much total fixed cost will the company evoldfiscloses the plant for two months What is the finance advantage disadvantage of closing the plant for the to-month period d. Should Andret close the plant for tvo months 5. An outside manufacturer has offered to produce 94000 Daks and ship them directly to Anders e ns Are Company accepts this offer the facilities that uses to produce Ders would bele howeves 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 to thirds of their present amount. What is Andret savoidable cost per un tret it should compare to the price quoted by the outside
