Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 $58

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 $58 per unit. The companys unit costs at this level of activity follow:

Direct materials $ 19.00
Direct labour 13.50
Variable manufacturing overhead 11.30
Fixed manufacturing overhead 5.00 $435,000 total
Variable selling expenses 3.90
Fixed selling expenses 3.50 $304,500 total
Total cost per unit $ 56.20

A number of questions relating to the production and sale of Daks follow. Consider each question separately.

1. Assume that Andretti Company has sufficient capacity to produce 150,000 Daks every year without any increase in fixed manufacturing overhead costs. The company currently produces and sells 87,000 units each year. However, it plans to increase the fixed selling expenses by $30,625 in order to increase sales. By how much should sales increase in order to justify the additional $30,625? Please compute the percentage increase in sales. (Do not round intermediate calculations. Round up your "units" answers to the nearest whole number and percentage answer to 2 decimal places.)

Increase in sales x units

Percentage in sales x %

4. Due to a strike in its suppliers plant, Andretti Company is unable to purchase more materials for the production of Daks. The strike is expected to last for two months. Andretti Company has enough materials on hand to continue to operate at 30% 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, all fixed costs would continue at 50% of their normal level during the two-month period. What would be the dollar advantage or disadvantage of closing the plant for the two-month period? (Do not round intermediate calculations.)

Net advantage or disadvantage x

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Capital Market Instruments Analysis And Valuation

Authors: M. Choudhry, D. Joannas, G. Landuyt, R. Pereira, R. Pienaar

3rd Edition

0230576036, 9780230576032

More Books

Students also viewed these Accounting questions

Question

What is meant by formal organisation ?

Answered: 1 week ago

Question

What is meant by staff authority ?

Answered: 1 week ago

Question

Discuss the various types of policies ?

Answered: 1 week ago

Question

Briefly explain the various types of leadership ?

Answered: 1 week ago

Question

The relevance of the information to the interpreter

Answered: 1 week ago