Question
Andretti Company produces and sells a single product called a Dak. The company normally produces and sells 60,000 Daks each year at a selling price
Andretti Company produces and sells a single product called a 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 manufacturing 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
A number of questions related to the production and sale of Daks follow. Each question is independent.
Requirements:
1. Assume that Andretti Company has sufficient capacity to produce 90,000 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its units sales to 90,000 units each year if it willing to increase the fixed selling expenses by $180,000. What is the expected annual increase (decrease) in annual profit of investing an additional $180,000 in fixed selling expenses? Should the additional investment by made?
Andretti Company produces and sells a single product called a 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 manufacturing 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 |
|
A number of questions related to the production and sale of Daks follow. Each question is independent.
Requirements:
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