Andretti Company has a single product called a Dak The company normally produces and sells 86.000 Daks each year at a selling price of $62 per unit. The company's unit costs at this level of activity are given below. Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total cost per unit $ 7.50 10.00 20 7.00 (S2,000 total) 4.70 4.50 (387,000 total) $36.5e A number of questions relating to the production and sale of Daks follow. Each question is independent Required: 1-a. Assume that Andretti Company has sufficient capacity to produce 107.500 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 25% above the present 86.000 units each year it were willing to increase the fixed selling expenses by $140,000 What is the financial advantage disadvantage of investing an additional 5140,000 in fixed selling expenses? 16. Would the additional investment be justified? 2. Assume again that Andretti Company has sufficient capacity to produce 107.500 Daks each yeu Acustomer a foreign market wants to purchase 21.500 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $170 per unit and an additional $15.050 for permits and licenses. The only selling costs that would be associated with the order would be $2.40 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 Irregularities, it will be impossible to sell these units at the normal price through regular distribution channel what the cost figure that is relevant for setting a minimum selling price 4. Due to a strike in its supplier's plant Andretti Company is unable to purchase more material for the production of these expected to last for two months Andretti Company has enough material on hand to operate a 25% of normal levels for the two month period. As an alternative. Andretti could close its plant down entirely for the two month the plant were comedored manufacturing overhead costs would continue at 35% of the normal level during the two month period and the foed selling expenses would be reduced by 20% during the two month period a How much total contribution margin Will Andrett for go if it closes the plant for two months How much total fixed cost will the company avoid if it closes the plant for two months What is the financial advantage disadvantage of closing the plant for the two month period d. Should Andretti close the plant for two months 5. An outside manufacturer has offered to produce 86.000 Dox and ship themderectly to Andrett's customers. Andre Company accepts this offer the facilities that uses to produce would be die nowever, find manufacturing overhead costs would be reduced by 30% Because the outside manufacturer would pay for all shoping costs the variable expenses wowo thirds of the present amount What is Andvoldable copernit trait houd compare to the price quoted by the outside manufacturer
