Question
Andretti Company has a single product called a Dak. The company normally produces and sells 88,000 Daks each year at a selling price of $48
Andretti Company has a single product called a Dak. The company normally produces and sells 88,000 Daks each year at a selling price of $48 per unit. The companys unit costs at this level of activity are given below: |
Direct materials | $ | 9.50 | |
Direct labor | 8.00 | ||
Variable manufacturing overhead | 3.30 | ||
Fixed manufacturing overhead | 7.00 | ($616,000 total) | |
Variable selling expenses | 3.70 | ||
Fixed selling expenses | 5.50 | ($484,000 total) | |
Total cost per unit | $ | 37.00 | |
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 118,800 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its sales by 35% above the present 88,000 units each year if it were willing to increase the fixed selling expenses by $140,000. Calculate the incremental net operating income
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