Andretu Company has a single product called a Dak. The company nomally produces and sells 88.0oo Daks each year ar a seting price of $60 per unit. The company's unit costs at this level of activity are given below: A number of questions relating to the producton and sale of Daks follow. Each question is nidependerit Required: 1-a. Assume that Andretu Compary has sufficient capacity to produce 105.600 Dais each year withour ary hicrease in fived manufacturing overhead costs. The company could increase its unit sales by 20% above the present 88.000 units each year in in were Wiling to increase the fixed selling expenses by $130,000. What is the financial advantage (dsadyantage) of thvestig an acditional $130.000 in fixed selling expenses? Hb. Would the additonal investment be justified? 2 Assume again that Andretz Company has sufficlent capacity to produce 105,600 Daks each year A cusomer in a foreign market wants to purchase 17.600 Daks. If Andrem accepts this order it would have to pay import duttes on the Daks of 5270 per unit and ani additonal $8.800 for permits and licenses. The only selling costs that would be associated with the order would be 5200 per unity shipping cost. What is the break even price per unit on this order? 3. The company has 800 Daks on hand that have some irregularmes and are therefore considered to be "seconds." Due to the irregulartves. It will be impossible to sel these units at the normal pnce through regular distribution channels. What is the uniticost figure that is relevant for setting a minimum seling price? 4. Due to a strike in its supplier's plant, Andreti Company is unable to purchase more matenal for the producuion of Daks The strike is expected to last for two months. Andretu Company has enough material on hand to operate at 25% of normal leveis for the two-nhonth penod. As an alternatve. Andreru could close its plart down entrely for the two months. If the plant were closed. futh manufactuning overhead costs would conunue at 35% of their normal level curing the two-month period and the fixed selling expenses would be reduced by 20% during the two-month penod. a. How much total contrbumon margin will Andretu forgo if it doses the plant for two months? b. How much total fived cost will the company avold if it closes the plant for two months? c. What is the financial advantage (disadvartage) of closing the plant for the two-month perlod? d. Should Andremi close the plant for two months? 5. An outside manufacturer has offered to produce 88.000 Daks and ship them drectly to Andreta's customers. If Andretulu Company accepts this offec, the facilives that it uses to produce Daks would be idle: however. fixed manufacturing overhead coss would be reduced by 30%. Because the outside manufocturer would poy for ail shipping costs, the vartable seling expenses would be only twothirds of their present amount. What is Andreti's avoidable cost per unit that it should compare to the pnce cuored by the outside manufacturer? Complete this question by entering your answers in the tabs below. Assume that Andrets Company has sufficient capacity to produce 105,600 Daks each year wathout any increase in fued manufacturing overhead conts. The company could incresse its unit sales by 20% above the present 86,0000 urits ofich year if It wrere wiling to increase the fixed selling expenses by 5130,000 . What is the financial edvantage (desadvantage) of invearing an additional 5130,000 in fued selling expenses
