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 $60 per unit. The companys unit costs at this level of activity are given below:

Direct materials	$	8.50
Direct labor		9.00
Variable manufacturing overhead		2.70
Fixed manufacturing overhead		4.00	($332,000 total)
Variable selling expenses		4.70
Fixed selling expenses		2.50	($207,500 total)
Total cost per unit	$	31.40

A number of questions relating to the production and sale of Daks follow. Each question is independent.

1. Assume that Andretti Company has sufficient capacity to produce 116,200 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 40% above the present 83,000 units each year if it were willing to increase the fixed selling expenses by $140,000. What is the financial advantage (disadvantage) of investing an additional $140,000 in fixed selling expenses?

2. 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 30% 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?

3. An outside manufacturer has offered to produce 83,000 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?