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Andretti Company has a single product called Dak. The company normally produces and sells 60,000 Daks each year at a selling price of $32 per
Andretti Company has a single product called Dak. The company normally produces and sells 60,000 Daks each year at a selling price of $32 per unit. The companys unit costs at this level of activity are given below: Direct materials $10.00 Direct labor $4.50 Variable manufacturing overhead $2.30 Fixed manufacturing overhead $5.00 ($300,000 total) Variable selling expenses $1.20 Fixed selling expenses $3.50 ($210,000 total) Total cost per unit $26.50 Assume that Andretti has sufficient capacity to produce 90,000 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its sales by 25% above the present 60,000 units each year if it were willing to increase the fixed selling expenses by $80,000. Would the increase in fixed expenses be justified? Explain. (Can someone please help me with this and explain if you can in a step by step manner what the answer is and how I go about getting the answer, each step and everything, thank you very much.)
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