Question
Andretti Company has a single product called a Dak. The company normally produces and sells 80,000 Daks each year at a selling price of $42
Andretti Company has a single product called a Dak. The company normally produces and sells 80,000 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 | $ | 6.50 | |
Direct labor | 11.00 | ||
Variable manufacturing overhead | 3.80 | ||
Fixed manufacturing overhead | 7.00 | ($560,000 total) | |
Variable selling expenses | 4.70 | ||
Fixed selling expenses | 3.50 | ($280,000 total) | |
Total cost per unit | $ | 36.50 | |
Required: | ||||
1-a. | Assume that Andretti Company has sufficient capacity to produce 108,000 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its sales by 35% above the present 80,000 units each year if it were willing to increase the fixed selling expenses by $150,000. Calculate the incremental net operating income. increased sales in units contribution margin per unit incremental contribution margin less added fixed seling expenses incremental net operating income
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