Andrette Company has a single produa colled a Dak The company normally produces and selis 81.000 Daks each year ata selling price of $60 per unt. The company's unit costs at this level of activity are given below Direct saterials 5 5.50 Direct labor 10.00 Variable manufacturing overhead 3.30 Fixed manufacturing overhead 5.00 (5405,cea total) Variable selling expenses 2.70 Fixed selling expenses 1.se (5283, see total) Total cost per unit $31.00 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 97.200 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sates by 20% above the present 81.000 units each year if it 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? 1-5. Would the additional investment be justified? 2. Assume again that Andrett Company has sufficient capacity to produce 97.200 Daks each year A customer in a foreign market wants to purchase 16,200 Doks. If Andretti accepts this order it would have to pay import duties on the Daks of $170 per unit and an additional $11,340 for permits and licenses. The only selling costs that would be associated with the order would be $150 per unit Shipping cost. What is the break-even price per unit on this order? 3. The company has 400 Daks on hand that have some trregularities 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 it is 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 30% of their normal level during the two-month penod and the fixed selling expenses would be reduced by 20% during the two-month penod a. How much total contribution margin Will Andrett forgo if it closes the plant for two months? How much total fixed cost will the company avoid if it closes the plant for two months? What is the financial advantage disadvantage of closing the plant for the two-month period? d. Should Andret close the plant for two months? 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 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 81,000 Daks and ship them directly to Andrett's customers. If Andretti Company accepts this offer the facilmes 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 vartable seling 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 Red 10 Reg2 Reg 3 Reg 4 to 4C Red 40 Reqs Assume that Andretti Company has sufficient capacity to produce 97.200 Daios each year without any increase in forced manufacturing overhead costs. The company could increase its unit sales by 20% above the present 81,000 units each year if it were willing to increase the fixed selling expenses by $130,000. What is the financial advantage (disadvantage of investing an additional $130.000 in foed selling expenses? Req 18>
