Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Help me with my managerial accounting hw Andretti Company has a single product called a Dak. The company normally produces and sells 6 0 ,

image text in transcribed
Help me with my managerial accounting hw
Andretti Company has 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 company's unit costs at this level of activity are given below:
\table[[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,]]
A number of questions relating to the production and sale of Daks follow. Each question is independent.
Required:
1-a. Assume 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 unit sales by 25% above the present 60,000 units each year if it increased fixed selling expenses by $80,000. What is the financial advantage (disadvantage) of investing an additional $80,000 in fixed selling expenses?
1-b. Would the additional investment be justified?
2. Assume Andretti Company has sufficient capacity to produce 90,000 Daks each year. A customer in a foreign market wants to purchase 20,000 Daks. If Andretti accepts this order, it would :Aay import duties on the Daks of $1.70 per unit and an additional $9,000 for permits and licenses. The only selling costs associated with the order would be $3.20 per unit shipping cost. What is the breakeven price per unit on this order?
3. The company has 1,000 Daks on hand with some irregularities that make it impossible to sell them at the normal price through regular distribution channels. What unit cost figure is relevant for setting a minimum selling price to liquidate these units?
4. 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 30% 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 60% of their normal level during the two-month period and the fixed selling expenses would be reduced by 20% during the two-month period.
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?
d. Should Andretti close the plant for two months?
5. An outside manufacturer offered to produce 60,000 Daks and ship them directly to Andretti's customers. If Andretti Company accepts this offer, the facilities it uses to produce Daks would be idle; however, fixed manufacturing overhead costs would be reduced by 75%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two-thirds of their present amount. What is Andretti's avoidable cost per unit it should compare to the price quoted by the outside manufacturer?
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Advanced Financial Accounting

Authors: Theodore E. Christensen, David M. Cottrell, Cassy JH Budd

11th edition

78025877, 978-0078025877

More Books

Students also viewed these Accounting questions

Question

What activities do you enjoy when you are not working?

Answered: 1 week ago