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 $58 per unit. The company's unit costs at this level of activity are given below A number of questions relating to the production and sale of Daks follow. Each question is independent: Required: 1-o. Assume that Andretti Company has sufficient capacity to produce 110,000 Daks each year without any increase in fixed manufacturing overhead costs. The compony could increase its unit soles by 25% above the present 88,000 units eoch year if it were willing to increase the fixed selling expenses by $150,000. What is the financial advantoge (disadvantoge) of investing an additional $150,000 in fixed selling expenses? 1.b. Would the additional investment be justified? 2. Assume again that Andretti Compeny has sufficient capacity to produce 110.000 Daks each year. A customer in a foreign market wants to purchase 22,000 Doks. If Andretti accepts this order it would have to pay import duties on the Daks of $3370 per unit and an additional $15,400 for permits and licenses. The only selling costs that would be associated with the order would be $160 per unit shipping cost What is the breakeven price per unit on this order? 3. The compeny has 700 Daks on hand that have some irregularities and are therefore considered to be "seconds "Due to the irreguiarities, 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 o minimum seling price? 4. Due to a strike in its supplier's plant Andretti Company is unsble 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 ot 25 th of normal leveis for the two-month period. As an alternative. Andreti could close is plant down entirely for the two months. If the plant were closed, fxed manufocturing overheod costs would continue ot 35% of their normal level during the two month period ond the fixed selling expenses would be reduced by 20% during the two-month period. 5. An outside monufocturer has offered to produce 88.000 Doks and ship them directly to Andretrs customers if Andreti Compony accepts this offec, the focilities that it uses to produce Daks would be idie. however, fixed manufocturing overhead costs would be reduced by 30% Because the outside manufocturer would pay for all thipping costs, the variabie selling expenses would be only twothirds of their present amount. What is Andrettis avoidoble cost per unit thot it shouid compare to the price quoted by the outside manufocturer? 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 compony avoid if it closes the plant for two months? c. What is the financial advantoge (disadvantage) of closing the plant for the two month period? d. Should Andrett close the plant for two months