Andretti Company has a single product called a Dak. The company normally produces and sells 82,000 Daks each year at a selling price of $42 per unit. The company's unit costs at this level of activity are given below Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total cost per unit S 8.50 11.00 3.50 3.00 (S246,000 total) 4.70 6.50 (S533,000 total) $ 37.20 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 102,500 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 25% above the present 82,000 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? 1-b. Would the additional investment be justified? 2. Assume again that Andretti Company has sufficient capacity to produce 102,500 Daks each year. A customer in a foreign market wants to purchase 20,500 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $3.70 per unit and an additional $16,400 for permits and licenses. The only selling costs that would be associated with the order would be $1.90 per unit shipping cost. What is the break-even price per unit on this order? 3. The company has 700 Daks on hand that have some irregularities and are therefore considered to be "seconds." Due to the rregularities, 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? 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? 5. An outside manufacturer has offered to produce 82,000 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? Complete this question by entering your answers in the tabs below Required 1-a. Assume that Andretti Company has sufficient capacity to produce 102,500 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 25% above the present 82,000 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? 1-b. Would the additional investment be justified? 2. Assume again that Andretti Company has sufficient capacity to produce 102,500 Daks each year. A customer in a foreign market wants to purchase 20,500 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $3.70 per unit and an additional $16,400 for permits and licenses. The only selling costs that would be associated with the order would be $1.90 per unit shipping cost. What is the break-even price per unit on this order? 3. The company has 700 Daks on hand that have some irregularities and are therefore considered to be "seconds." Due to thee 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 norm al 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? 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? 5. An outside manufacturer has offered to produce 82,000 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? Complete this question by entering your answers in the tabs belovw Req 1A Req 1B Req 2 Req 3 Req 4A to 4C Req 4D Req 5 Assume that Andretti Company has sufficient capacity to produce 102,500 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 25% above the present 82,000 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? 3. The company has 700 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? 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? 5. An outside manufacturer has offered to produce 82,000 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? Complete this question by entering your answers in the tabs below Req 1A Req 18 Req 2 Req 3 Req 4A to 4C Req 4D Req 5 Assume again that Andretti Company has sufficient capacity to produce 102,500 Daks each year. A customer in a foreign market wants to purchase 20,500 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $3.70 per unit and an additional $16,400 for permits and licenses. The only selling costs that would be associated with the order would be $1.90 per unit shipping cost. What is the break-even price per unit on this order? (Round your answers to 2 decimal places.) Show less k-even price per unit Req 1B Req 3 ccepts this offer, the facilities that it uses to produce Daks would be idle; however, fixed manufacturing overhead costs would be educed by 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two. irds of their present amount. What is Andretti's avoidable cost per unit that it should compare to the price quoted by the outside anufacturer? Complete this question by entering your answers in the tabs below Req 3Req 4A to 4C Req 4D Req 1A Req 1B Req 2 Req 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 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 K Req 3 Req 4D f Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, the company is thinking about dropping several flights that appear to be unprofitable A typical income statement for one round-trip of one such flight (flight 482) is as follows: Ticket revenue (115 seats x 40% occupancy x $75 ticket price) Variable expenses ($11.00 per person) Contribution margin Flight expenses: $3,450 100.0% 506 14.7 2,944 85. 3% salaries, flight crew Flight promotion Depreciation Fuel for aircraft Liability insurance Salaries, flight assistants Baggage loading and flight preparation Overnight costs for flight crew and assistants $ 330 710 370 of aircraft 270 740 200 60 2,845 at destination Total flight expenses Net operating loss $ (99) The following additional information is available about flight 482: a. Members of the flight crew are paid fixed annual salaries, whereas the flight assistants are paid based on the number of round trips they complete b. One-third of the liability insurance is a special charge assessed against flight 482 because in the opinion of the insurance company the destination of the flight is in a "high-risk" area. The remaining two-thirds would be unaffected by a decision to drop flight 482 C. The baggage loading and flight preparation expense is an allocation of ground crews' salaries and depreciation of ground equipment. Dropping flight 482 would have no effect on the company's total baggage loading and flight preparation expenses d. If flight 482 is dropped, Pegasus Airlines has no authorization at present to replace it with another flight. e. Aircraft depreciation is due entirely to obsolescence. Depreciation due to wear and tear is negligible Dropping flight 482 would not allow Pegasus Airlines to reduce the number of aircraft in its fleet or the number of flight crew on its payroll Required 1. What is the financial advantage (disadvantage) of discontinuing flight 482