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Andretti Company has a single product called a Dak. The company normally produces and sells 83,000 Daks each year at a selling price of $58

Andretti Company has a single product called a Dak. The company normally produces and sells 83,000 Daks each year at a selling price of $58 per unit. The companys unit costs at this level of activity are given below:

Direct materials $ 8.50
Direct labor 11.00
Variable manufacturing overhead 3.30
Fixed manufacturing overhead 7.00 ($581,000 total)
Variable selling expenses 3.70
Fixed selling expenses 4.00 ($332,000 total)
Total cost per unit $ 36.50

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 112,050 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 35% above the present 83,000 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?

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