Andretti Company has a single product called a Dak. The company normally produces and sells 87,000 Daks each year at a selling price of $62 per unit. The companys unit costs at this level of activity are given below:
Direct materials$ 8.50
Direct labor11.00
Variable manufacturing overhead2.70
Fixed manufacturing overhead5.00($435,000 total)
Variable selling expenses3.70
Fixed selling expenses4.50($391,500 total)
Total cost per unit$ 35.40
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 117,450 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 35% above the present 87,000 units each year if it were willing to increase the fixed selling expenses by $130,000. What is the financial advantage (disadvantage) of investing an additional $130,000 in fixed selling expenses?
1-b. Would the additional investment be justified?
2. Assume again that Andretti Company has sufficient capacity to produce 117,450 Daks each year. A customer in a foreign market wants to purchase 30,450 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $3.70 per unit and an additional $18,270 for permits and licenses. The only selling costs that would be associated with the order would be $1.60 per unit shipping cost. What is the break-even price per unit on this order?
3. The company has 800 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 channels. What is the unit cost figure that is relevant for setting a minimum selling price?
4. 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 material on hand to operate at 25% 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 manufacturing overhead costs would continue at 40% of their normal level during the two-month period and the fixed selling expenses would be reduced by 20% during the two-month period.
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 avoid 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?
5. An outside manufacturer has offered to produce 87,000 Daks and 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 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 two-thirds of their present amount. What is Andrettis avoidable cost per unit that it should compare to the price quoted by the outside manufacturer?
Andrett Company has a single product called a Dak. The company normally produces and sells 87000 Saks 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 $8.50 Direct labor 11.00 Variable manufacturing overhead 2.70 Fixed manufacturing overhead 5.00 (5435,000 total) Variable selling expenses 3.70 Fixed selling expenses 4.50 (5391,5e0 total) Total cost per unit $ 35.40 od -ences A number of questions relating to the production and sale of Daks follow Each question is independent Required: 18 Assume that Andretti Company has sufficient capacity to produce 117450 Daks each year without my increase in foed manufacturing overhead costs. The company could increase its unit sales by 35% above the present 87000 units each year if it were Willing to increase the fixed selling expenses by $130,000. What is the financial advantage (disadvantages of investing an additional $130.000 in fixed selling expenses? 16. Would the additional investment be justified? 2. Assume again that Andretti Company has sufficient capacity to produce 117,450 Daks each year A customer in a foreign market wants to purchase 30,450 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $370 per unit and an additional $18.270 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 break-even price per unit on this order? 3. The company has 800 Daks on hand that have some irregularities and are therefore considered to be "seconds. Due to the irregularmes, 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 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 Doks. The strikes expected to last for two months. Andretti Company has enough material on hand to operate at 25% of normal levels for the two month period. As an alternative, Andretti could close its plant down entirely for the two months of the plant were closed, fed manufacturing overhead costs would continue at 40% of their normal level during the two month period and the fixed selling expenses would be un investment be justified? 2. Assume again that Andretti Company has sufficient capacity to produce 117450 Daks each year. A customer in a foreign market wants to purchase 30,450 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $370 per unit and an additional $18,270 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 break-even price per unit on this order? 3. The company has 800 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 channels. What is the unit 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 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 period. As an alternative, Andretti could close its plant down entirely for the two months. If the plant were closed, fixed manufacturing overhead costs would continue at 40% of their normal level during the two month period and the fixed selling expenses would be reduced by 20% during the two-month period 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 avoid 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? 5. An outside manufacturer has offered to produce 87,000 Daks and ship them directly to Andrettis customers of 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 two thirds of their present amount. What is Andretti's avoidable cost per unit that it should compare to the price quoted by the outside manufacturer Complete this question by entering your answers in the tabs below. Dann reduced by 30% Because the outside lauld thirds of their present amount. What is Andretti's avoidable cost per unit that it should compare to the price quoted by the outside manufacturer? Complete this question by entering your answers in the tabs below. Reg LA Reg 1B Req2 Reg 3 Regs Reg 44 to 40 Reg 4D Assume that Andrett Company has sufficient capacity to produce 117,450 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 35% above the present 87,000 units each year if it were willing to increase the fixed selling expenses by $130,000. What is the financial advantage (disadvantage) of investing an additional $130,000 in fixed selling expenses? Show less Rea Reg 18 > 5. An outside manufacturer has offered to prod accepts this offer the facilities that it uses to produce Daks would be idle, however, fixed manufacturing overhead costs WLU reduced by 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two thirds of their present amount. What is Andretti's avoidable cost per unit that it should compare to the price quoted by the outside manufacturer? Complete this question by entering your answers in the tabs below. Reg 5 Req 4D Reg 2 Req3 Reg 4A to 40 Reg 1B Reg 1A Assume that Andretti Company has sufficient capacity to produce 117,450 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 35% above the present 87,000 units each year if it were willing to increase the fixed selling expenses by $130,000. Would the additional investment be justified? Yes ONO Reg 2 > 5. An outside manufacturer has offered to produce 87,000 Daks and ship them directly to Andretti'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 two thirds of their present amount. What is Andrett's avoidable cost per unit that it should compare to the price quoted by the outside manufacturer? Complete this question by entering your answers in the tabs below. Reg 3 Reg 4D Req 1B Reg 4A to 4C Reg 5 Req IA Reg 2 The company has 800 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 channels. What is the unit cost figure that is relevant for setting a minimum selling price? (Round your answer to 2 decimal places.) Relevant un cost per unit manufacturer? Bluster Unit that it should compare to the price quoted by the outside Complete this question by entering your answers in the tabs below. Reg 1 Reg 1B Reg 2 Req3 Reg 4 to 40 Fleg 4D Reg 5 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 period. As an alternative, Andretti could close its plant down entirely for the two months. If the plant were dosed, fixed manufacturing overhead costs would continue at 40% of their normal level during the two-month period and the fixed selling expenses would be reduced by 20% during the two-month period. (Roand number of units produced to the nearest whole number Round your intermediate calculations and final answers to 2 decimal places. Any losses/reductions should be indicated by i minus sign) 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 avoid if it closes the plant for two months? c. What is the financial advantage (disadvantage) of closing the plant for the two-month period? Show less CCleaner We fou Forgone continut margin Total vocable fixed costs Financial advantage (disadvantage) Prey Next > thirds of their present amount what is Andrews avoidable cost per unit that it should compare to the price quoted by the outside manufacturer? Complete this question by entering your answers in the tabs below. Reg 1A Reg 18 Reg 2 Reg 3 Reg 4 to 40 Reg 4D Reg 5 es Due to a strike in its supplier's plant, Andretti Company is unable to purchase more material for the production of Daks. The stnke 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 period. As an alternative, Andretti could close its plant down entirely for the two months. If the plant were dosed, fixed manufacturing overhead costs would continue at 40% of their normal level during the two-month period and the fixed selling expenses would be reduced by 20% during the two-month period. Should Andretti close the plant for two months? Show less Yes No thirds of their present amount What is Andretti's avoidable cost per unit that it should compare to the price quoted by the outside manufacturer? Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Reg 2 Req3 Req 4 to 4C Req 40 Reg 5 1 An outside manufacturer has offered to produce 87,000 Daks and ship them directly to Andretti'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 two-thirds of their present amount. What is Andretti's avoidable cost per unit that it should compare to the price quoted by the outside manufacturer? (Do not round intermediate calculations, Round your answers to 2 decimal places.) Show less de boot per un
