Andretti Company has a single product called a Dak. The company normally produces and sells 86,000 Diks each year at a selling price of $56 per tinit. The comparys s unit costs at this level of activity ate given befow: A number of questions relating to the production and sale of Daks follow. Each question is independent 4. Due to a strike in its supplier's 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 material on hand to operate at 25% of normal levels for the two-month perfod. As an altemative. Ardretti could close its plant down entirely for the two months. If the plant were closed, fixed manufacturing overthead costs would continue at 35% of their normal level during the two-month period and the fixed selling experises would be reduced by 20% during the two month period. 5. An outside manufacturer has offered to produce 86,000 Daks and ship them directly to Andrett's 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 twothirds of their present amount. What is Andrett's avoidable cost per unit that it should compare to the price quoted by the outside manufacturer? 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 company avold if it closes the plant for two months? C. What is the financial advantage (disadvantage) of closing the plant for the two month period? d. Should Andretti close the plant for two months? 1.a. Assume that Andrettl Company has sufficient capacity to produce 120,400 Daks each year without any icicrease in fixed manufacturing overhead costs. The company could increase its unit sales by 40% above the present 86,000 units each year if it were willing to increase the fixed selling expenses by $100,000. What is the financial advantage (disadvantage) of investing an additional $100,000 in fixed selling expenses? 1-b. Would the additional investment be justified? 2. Assume again that Andretti Company has sufficient capacity to produce 120,400 Daks each year. A customer in a foreign market wants to purchase 34,400 Daks. If Andretti accepts this order it would have to pay import dutles on the Daks of $2.70 per unit and an additional $20,640 for permits and licenses. The only selling costs that would be associated with the order would be $170 per unit shipping cost. What is the break-even price per unit on this order? 3. The company has 500 Daks on hand that have some irregularities and are therefore considered to be "seconds. "Due to the irregularties, it will be impossible to sell these units at the normal price through regular distribution channels. What is the unil cost figure that is relevant for selting a minimum selling price