As the newly appointed Controller of Lynbrook, Inc. you have been asked to evaluate

several scenarios that management is considering to improve the overall profitability of

the company. Lynbrook manufactures and sells a product called a Wren, its only

product. The company normally produces and sells $60,000$ Wrens each year at a selling

price of $$32$ per unit. The company's unit costs at this level of activity are included

below:

The CFO of Lynbrook would like your response to the following three $(3)$ independent

situations to present to the management team early next week.

Situation #$1$

Assume that Lynbrook has sufficient capacity to produce $90,000$ Wrens each year

without any increase in fixed manufacturing overhead costs. The company could

increase its unit sales by $25\%$ above the present $60,000$ units each year if it were willing

to increase the fixed selling expenses by $$80,000.$

Required:

What is the financial advantage $($disadvantage$)$ of investing an additional $$80,000$ in

fixed selling expenses? Would the additional investment be justified?

Situation #$2$

Assume again that Lynbrook has sufficient capacity to produce $90,000$ Wrens each year. A customer in a foreign market wants to purchase $20,000$ Wrens. If Lynbrook accepts this order it would have to pay import duties on the Wrens of $$1\mathrm{.}70$ per unit and an additional $$9,000$ for permits and licenses. The only selling costs that would be associated with the order would be $$3\mathrm{.}20$ per unit shipping cost.

Required:

What is the break$-$even price per unit on this order?

Situation #$3$

The company has $1,000$ Wrens on hand that have some irregularities and are therefore considered to be $$seconds$.$ Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels.

Required:

What is the unit cost figure that is relevant for setting a minimum selling price? Explain.