Andretti Company has a single product called a Dak. The company

normally produces and sells $80,000$ Daks each year at a selling

price of $$56$ per unit. The company$$s unit costs at this level of

activity are given below: 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 $108,000$ Daks each year without any increase in fixed

manufacturing overhead costs. The company could increase its unit

sales by $35\%$ above the present $80,000$ units each year if it were

willing to increase the fixed selling expenses by $$110,000.$ What is

the financial advantage $($disadvantage$)$ of investing an additional

$$110,000$ in fixed selling expenses?$1-$b$.$ Would the additional investment be justified?$2.$ Assume again that Andretti Company has sufficient capacity to

produce $108,000$ Daks each year. A customer in a foreign market

wants to purchase $28,000$ Daks. If Andretti accepts this order it

would have to pay import duties on the Daks of $$3\mathrm{.}70$ per unit and

an additional $$19,600$ for permits and licenses. The only selling

costs that would be associated with the order would be $$1\mathrm{.}70$ per

unit shipping cost. What is the break$-$even price per unit on this

order?$3.$ The company has $600$ 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 $80,000$ 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?