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Andretti Company has a single product called a Dak. The company normally produces and sells 114,000 Daks each year at a selling price of $86
Andretti Company has a single product called a Dak. The company normally produces and sells 114,000 Daks each year at a selling price of $86 per unit. The company's unit costs at this level of activity follow: $25.50 Direct materials Direct labour 20.00 Variable manufacturing overhead 17.80 $570,000 5.00 Fixed manufacturing overhead Variable selling expenses 6.60 $399.000 Fixed selling expenses 3.50 Total cost per unit $78.40 A number of questions relating to the production and sale of Daks follow. Consider each question separately. Required: 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 114,000 units each year if it were willing to increase the fixed selling expenses by $36.250. a. Calculate the incremental net operating income. (Do not round intermediate calculations. Incremental net operating b. Would the increased fixed expenses be justified? O Yes O No
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