Andretti Company has a single product called a Dak. The company normally produces and sells 86,000 Daks each year at a selling price of $64 per unit. The company's unit costs at this level of activity are given below Direct materials $ 9.50 Direct labor 11.00 Variable manufacturing overhead Fixed manufacturing overhead 4.80 (5344,000 total) Variable selling expenses 3.70 Fixed selling expenses 4.50 (5.387,000 total) Total cost per unit $35.90 3.20 A number of questions relating to the production and sale of Daks follow. Each question is independent Required: Required: 1a Assume that Andretti Company has sufficient capacity to produce 116 100 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 35% above the present 86.000 units each year if it were Willing to increase the fixed selling expenses by $120,000. What is the financial advantage (disadvantage) of Investing an additional $120,000 in fixed selling expenses? 1-1 Would the additional investment be justified? 2. Assume again that Andretti Company has sufficient capacity to produce 116,100 Daks each year. A customer in a foreign market wants to purchase 30,100 Daks If Andretti accepts this order it would have to pay import duties on the Daks of $170 per unit and an additional $18.060 for permits and licenses. The only selling costs that would be associated with the order would be $150 per unit shipping cost. What is the break-even price per unit on this order? 3. The company has 900 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? What is the financial advantage (disadvantage) of closing the plant for the two-month period? d. Should Andrell close the plant for two months? 5. An outside manufacturer has offered to produce 86.000 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 Req IA Reg 1B Reg 2 Req3 Req 4A to 4C Reg 40 Reg 5 Assume that Andretti Company has sufficient capacity to produce 116,100 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 35% above the present 86,000 units each year if It were willing to increase the fixed selling expenses by $120,000. What is the financial advantage (disadvantage of Investing an additional $120,000 in fixed selling expenses? Show less Financial advantage Req1A Reg 1B Reg 2 Reg 3 Req 4A to 4C Reg 4D Reg 5 Assume that Andretti Company has sufficient capacity to produce 116,100 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 35% above the present 86,000 units cach year if it were willing to increase the fixed selling expenses by $120,000. Would the additional Investment be justified? Yes ONO Req 1A Reg 18 Reg 2 Req3 Reg 4 to 40 Reg 40 Reg 5 Assume again that Andretti Company has sufficient capacity to produce 116,100 Daks each year. A customer in a foreign market wants to purchase 30,100 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $1.70 per unit and an additional $18,060 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 answers to 2 decimal place.) Show less tlak von price per unit Reg 1A Reg 10 Reg 2 Reg 3 Reg 4A to 4C Reg 4D Reg 5 The company has 900 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? (Round your answer to 2 decimal places.) Relevant unit cost per unit Req 1A Reg 1B Reg 2 Req3 GREECE Req 4A to 40 Reg 4D Reg 5 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. (Round number of units produced to the nearest whole number. Round your intermediate calculations and final answers to 2 decimal places. Any losses/reductions should be indicated by a minus sign.) 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? Show less Forgone contribution margin Total avoidable fixed costs Financial advantage (disadvantage) Reg 1A Reg 1B Reg 2 Reg 3 Req 4A to 4C Req 4D Reg 5 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. Should Andretti close the plant for two months? Show less OYes ONO Reg IA Reg 1B Reg 2 Req3 Reg 4 to 40 Reg 4D Reg 5 An outside manufacturer has offered to produce 86,000 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? (Do not round intermediate calculations. Round your answers to 2 decimal places) Show less Avoidable cost per unit