Question
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 $42
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 $42 per unit. The companys unit costs at this level of activity are given below: Direct materials $ 9.50 Direct labor 11.00 Variable manufacturing overhead 2.00 Fixed manufacturing overhead 7.00 ($616,000 total) Variable selling expenses 3.70 Fixed selling expenses 6.50 ($572,000 total) Total cost per unit $ 39.70
An outside manufacturer has offered to produce Daks and ship them directly to Andrettis 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 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two-thirds of their present amount. Compute the unit cost that is relevant for comparison to the price quoted by the outside manufacturer. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
1. what are the variable manuf. costs?
2. what are the fixed manuf. overhead cost?
3. what is the selling expenses?
4. what is the total costs avoided?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started