Andrettl Company has a single product called a Dak. The company normally produces and sells 87,000 Daks each year at a selling price of $56 per unlt. The company's unlt costs at this level of actlvity are glven below: A number of questions relating to the production and sale of Daks follow. Each question is independent. Required: 1-3. Assume that Andrettl Company has sufficient capacity to produce 108,750 Daks each year without any Increase In fixed manufacturing overhead costs. The company could increase its unlt sales by 25% above the present 87,000 units each year if It were willing to increase the fixed selling expenses by $10,000. What is the financlal advantage (dlsadvantage) of Investing an additional $110,000 in fixed selling expenses? 1-b. Would the additional Investment be justified? 2. Assume again that Andrettl Company has sufficient capacity to produce 108,750 Daks each year. A customer In a foreign market wants to purchase 21,750 Daks. If Andrett accepts this order it would have to pay Import dutles on the Daks of $4.70 per unit and an additional $13,050 for permits and licenses. The only selling costs that would be assoclated with the order would be $1.30 per unlt shipping cost. What is the break-even price per unit on this order? 3. The company has 700 Daks on hand that have some Irregularitles and are therefore considered to be "seconds." Due to the Irregularitles, It will be impossible to sell these units at the normal price through regular dlstribution 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, Andrettl Company is unable to purchase more materlal for the productlon of Daks. The strike is expected to last for two months. Andrettl Company has enough materlal on hand to operate at 25% of normal levels for the two-month period. As an alternative, Andrettl could close its plant down entirely for the two months. If the plant were closed, fixed manufacturing overhead costs would continue at 30% of thelr normal level during the two-month perlod and the fixed selling expenses would be reduced by 20% during the two-month period. a. How much total contribution margin will Andrettl forgo if it closes the plant for two months? b. How much total fixed cost will the company avold if it closes the plant for two months? c. What is the financlal advantage (disadvantage) of closing the plant for the two-month perlod? d. Should Andrettl close the plant for two months? 5. An outside manufacturer has offered to produce 87,000 Daks and ship them dilrectly to Andrettl's customers. If AndrettI Company accepts this offer, the facilitles 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 varlable selling expenses would be only twothirds of their present amount. What is Andretti's avoldable 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. 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 30% 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 or 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
