Andretti Company has a single product called a Dak. The company normally produces and sells 117,000 Daks each year at a selling price of $89 per unit. The companys unit costs at this level of activity follow:

Direct materials

$

26.00

Direct labour

20.50

Variable manufacturing overhead

18.30

Fixed manufacturing overhead

5.00

$585,000 total

Variable selling expenses

6.90

Fixed selling expenses

3.50

$409,500 total

Total cost per unit

$

80.20

1.

Assume that Andretti Company has sufficient capacity to produce 200,000 Daks every year without any increase in fixed manufacturing overhead costs. The company could increase its sales by 25% above the present 117,000 units each year if it were willing to increase the fixed selling expenses by $36,875.

a.	Calculate the incremental net operating income. (Do not round intermediate calculations.)

2. Due to a strike in its suppliers 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 materials on hand to continue to operate at 30% 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 overhead costs would continue at 60% of their normal level during the two-month period; the fixed selling costs would be reduced by 20% while the plant was closed. What would be the dollar advantage or disadvantage of closing the plant for the two-month period? (Do not round intermediate calculations.)

3. An outside manufacturer has offered to produce Daks for Andretti Company and to 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 overhead costs would be reduced by 75% of their present level. Since the outside manufacturer would pay all the costs of shipping, the variable selling costs would be only two-thirds of their present amount. Compute the unit cost figure relevant for comparison to whatever quoted price is received from the outside manufacturer. (Do not round intermediate calculations. Round your answer to 2 decimal places.)