Andrett Company has s single product csiled s Dak. The compsny normslly produces and sells 90,000 Dsks eoch yeor at s selling price of $64 per unt. The compsny's unt costs st this level of sctivity sre glven be ow: A number of questions relsting to the productian and sale of Doks folow. Esch question ls independent. Required: 1-e. Assume that Andrett Compony hes sufficient cspocity to produse 121,500 Doks esch yesr without sny incresse in fived manufecturing overheod costa. The compony could incresse its unit ssiles by 35% sbove the present 90,000 units esch yesr if it were willing to incresse the fixed seling expenses by $130,000. Whst is the finsncisl advsntsge (disedvsntrge) of Investing sn sdiltionsi $130,000 in fixed seling expenses? T-b. Would the additional investment be justified? 2 Assume egsin thet Andrett Compeny has sufficient copecity to produce 121,500 Doks esch yesr. A custamer in s fareign market wonts to purchsse 31,500 Dsks. If Andirett sccepts this arder it would hove to psy import duties on the Duks of $3.70 per unit end sn sdiltionsl $29,350 for permits and lisenses. The only seling costs that would be assocsted with the order would be $1.50 per unlt shipping cost. What is the bresk-even price per unit on this arder? 3. The compeny has 400 Daks on hand that have some irregularties and are therefore considered to be "seconds." Due to the irregulsrities, it will be impossible to sell these units at the narmel price through reguler distribution chisnnels. What is the unt cost figure that is relevant for sett ig s minimum seling price? 4. Due to 9 strike in its supplier's plsnt, Andretti Compsny is unsble to purchsse more material for the production of Dsks. The strike is expected to leat for two manths. Andredi Compsny has enough meterisl on hend to aperste st 25% of normsl levels far the twomonth period. As on sitemstive, Andrett could clase its plsnt down entire y for the two months. Ff the plsnt were closed, fived manufiscturing overhesd coatz would continue st 35% of their nomal level during the twomonth period ond the fixed selling expenses would be recluced by 20% during the two-month period. a. How much tatsl contribution margin will Andrett forgo if it cloaes the plant far two monthe? b. How much totsl fixed cost will the compsny svold if it coses the plint for two manths? c. What is the finsnciol advantage (disseventege) of closing the plint for the two-manth period? d. Should Andrettl close the plsnt for two month:? 5. An outside menufscturer has offered to produce 90,000 Dsks snd ship them direct'y to Andrett's customers. If Andrett Compeny sccepts this offer, the focilites that it uses to produce Doks would be ide, however, fixed menufacturing overhesd costs would be recuced by 30%. Becsuse the outaide msnufiecturer wauld poy for al shipping cozta, the variable seling expenses would be anly twothirds of their present amount. What is Andrett's svoidsble coat per unit that it should compare to the price quoted by the outa de manufecturer? Complete this question by entering your answers in the tabs below. Acsume that Andretti Company has sumtident capacty to produca 121,500 Daks each year without any increase in fbeed manufacturing overhesd cocts. The company could increase its unit saies by 35\% abowe the present 90,000 units esch year if it were willing to increase the fored selling expenses by $130,000. What is the financial advantage (disadvantage) af inwerting an additional \$130,000 in fixed selling expenses? Due to a strike in its supplier's plant, Andretti Company is unable to purchase more material for the production af Daiss. The strike is expected ta last for two mantha. Andretti Company has enough msterial on hand to aperate at 25\% of narmal levels far the two-manth period. As an alternsthe, Andretti could dose its plant dowin entinely for the twa months. If the plant were dosed, fixed manufacturing owerhead coats would continue at 35% af their narmal level during the two-month period and the fbod seling expenaes would be reduced by 20% during the two-month perind. (Round number af units produced to the nearest whale number. Rnund your intermediste calculatians and final answers to 2 decimsl places. Any Insese/reductions should be indicated by a minus sign.) a. How much total contribution margin will Andretti forga if it cloess the plant for twa months? b. How much total fixed coat will the company avoid if it doses the plant for two months? c. What is the finsncial advantage (disadvantage) of doaing the plant for the two-month period
