Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Help would be much appreciated. Thank you! Andretti Company has a single product called a Dak. The company normally produces and sells 90,000 Daks each
Help would be much appreciated. Thank you!
Andretti Company has a single product called a Dak. The company normally produces and sells 90,000 Daks each year at a selling 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 production and sale of Daks follow. Each question is independent. Required: 1-a. Assume that Andretti Company has sufficient capacity to produce 126,000. Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 40% above the present 90.000 units each year if it were willing to increase the fixed selling expenses by $120,000. What is the financial advantage (disadvantage) of investing an additional $120,000 in fixed selling expenses? 1.b. Would the additional investment be justified? 2. Assume again that Andretti Company has sufficient capacity to produce 126.000 Daks each yeat A customer in a foreign market wants to purchase 36.000 Daks. If Andretti accepts this order it would have to pay import duties orr the Daks of $2.70 per unit and an additional $21,600 for permits and licenses. The only selling costs that would be associated with the order would be $2.80 per unit shipping cost. What is the break-even price per unit on this order? 3. The company has 500 Daks on hand that have some irregularities and ore 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. What is the unit cost figure thot is relevant for setting a minimum selling price? 4. Due to a strike in its supplier's plant, Andretu 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 leveis 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 overheod conts would continue at 35% 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 avold 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 has offered to produce 90,000 Daks and ship them directly to Andretti's customers. If Andreti Company accepts this offer, the faciliues that it uses to produce Daks would be idie; however, fixed manufacturing overhead costs would be reduced by 30%. Becouse the outside manutacturer would pay for all shipping costs, the variable selling expenses would be only twothirds of their present amount. What is Andrent's avoldable cost per unit that it should compare to the price quoted by the outside manufacturer Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started