indretti Company has a single product called a Dak. The company normally produces and sells 86,000 Daks each year at a seiling ofice $56 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 116,100 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 35% above the present 86,000 units each year if it were willing to increase the fixed selling expenses by $130,000. What is the financial advantage (disadvantage) of investing an additiona) $130,000 in fixed selling expenses? Hb. Would the additional investment be justified? 2 Assume again that Andrerti Company has sutficient capacity to produce 116,100 Daks each year. A customer in a foreign mark wante to purchase 30,100 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $170 per unit and an additional $21,070 for permits and Icenses. The only selling costs that would be associated with the order would be $1.40 per unit shipping cost What is the break-even price per unit on this order? 3. The company has 600 Daks on hand that have some irregularities and are therefore considered to be secondk" Due to the irregutarities, itwill be imposs ble to sell these units at the normal price through regular distribution channels. What is the unit cost figure that is relevant for setting a minimum seling price? 4. Due to a strike in ins supplier's plant. Andrett Company is unable to purchase more material for the production of Daks. The strike is expected to iast for two months. Andietri Company has enpugh material on hand to operate of 25% of normal ievels for the two-month period. As an aiternative, Andretti could close ins plant down entirely for the two montha. If the plant were closed, fixed manufacturing overhead costs would cortinue at 30% of their normal level during the two-month period and the fixed seling expenses would be reduced by 20% during the two month period. 5. An outside manufacturer has offered to produce 86,000 Daks and ship them directly to Andrertis customers. If Andretti Company accepts this offer, the facilities that it uses to produce Daks would be idie; howevec, fixed manutacturing ovethead costs would be reduced by 30% Because the outside manufecturer would pay for all shipping costs, the variable seling expenses would be oniy two thirds of their present amount. What is Andieti's avoidable cost per unit that it should compare to the price quoted by the outside manufacturer? 9. How much total contribution margin wal Andretti forgo if it closes the plant for two months? b. How much total foxed sost will the company avoid it it closes the plant for two months? c. What is the financiol advantage (disadvantage) of closing the plant for the two-month period? d. Shouid Andrerti close the piant for two months? Complate this question by entering your answers in the tabs below
