Andretti Company has a single product called a Dak. The company normally produces and sells 125,000 Daks each year at a selling Assume that Andretti Company has sufficient capacity to produce 150,000 Daks each year without any increase in price of $46 per unit. The company's unit costs at this level of activity are given below: fixed manufacturing overhead costs. The company could increase its unit sales by 20% above the present 125,000 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? Direct materials $ 8.50 Show less Direct labor 11.00 Variable manufacturing overhead 1.90 Financial advantage Fixed manufacturing overhead 4.00 $500,000 total) Variable selling expenses 1.70 Fixed selling expenses 4.50 ($562,500 total) Assume again that Andretti Company has sufficient capacity to produce 150,000 Daks each year. A customer in a foreign market wants to purchase 25,000 Daks. If Andretti accepts this order it would have to pay import duties on Total cost per unit $31.60 the Daks of $2.70 per unit and an additional $15,000 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? (Round your answer to 2 decimal places.) A number of questions relating to the production and sale of Daks follow. Each question is independent. Show less Required: Break-even price per unit 1-a. Assume that Andretti Company has sufficient capacity to produce 150,000 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 20% above the present 125,000 units each year if it were Due to a strike in its supplier's plant, Andretti Company is unable to purchase more material for the production of willing to increase the fixed selling expenses by $130,000. What is the financial advantage (disadvantage) of investing an additional Daks. The strike is expected to last for two months. Andretti Company has enough material on hand to operate at $130.000 in fixed selling expenses? 25% of normal levels for the two-month period. As an alternative, Andretti could close its plant down entirely for the 1-b. Would the additional investment be justified? two months. If the plant were closed, fixed manufacturing overhead costs would continue at 35% of their normal level 2. Assume again that Andretti Company has sufficient capacity to produce 150,000 Daks each year. A customer in a foreign market during the two-month period and the fixed selling expenses would be reduced by 20% during the two-month period. (Round number of units produced to the nearest whole number. Round your intermediate calculations and final wants to purchase 25,000 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $2.70 per unit and an answers to 2 decimal places. Any losses/reductions should be indicated by a minus sign.) additional $15,000 for 000 for permits and licenses. The only selling costs that would be associated with the order would be $1.60 per unit cost. What is the break-even price per unit on this order? a. How much total contribution margin will Andretti forgo if it closes the plant for two months? 3. The company has 900 Daks on hand that have some irregularities and are therefore considered to be "seconds." Due to the b. How much total fixed cost will the company avoid if it closes the plant for two months? irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What is the unit cost figure c. What is the financial advantage (disadvantage) of closing the plant for the two-month period? that is relevant for setting a minimum selling price? Show less 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 . SA 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 Forgone contribution margin overhead costs would continue at 35% of their normal level during the two-month period and the fixed selling expenses would be reduced by 20% during the two-month period. thu Total avoidable fixed costs 72,916.67 a. How much total contribution margin will Andretti forgo if it closes the plant for two months? Financial disadvantage 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? An outside manufacturer has offered to produce 125,000 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 5. An outside manufacturer has offered to produce 125,000 Daks and ship them directly to Andretti's customers. If Andretti Compan 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 accepts this offer, the facilities that it uses to produce Daks would be idle; however, fixed manufacturing overhead costs would be avoidable cost per unit that it should compare to the price quoted by the outside manufacturer? (Do not round reduced by 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only tv intermediate calculations. Round your answer to 2 decimal places.) thirds of their present amount. What is Andretti's avoidable cost per unit that should compare to the price quoted by the outside manufacturer? Show less Avoidable cost per unit $