Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please answer the 4 parts of the question posted above - Thank you! Andretti Company has a single product called a Dak. The company normally

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed

Please answer the 4 parts of the question posted above - Thank you!

Andretti Company has a single product called a Dak. The company normally produces and sells 86,000 Daks each year at a selling price of $60 per unit The company's unit costs at this level of activity are glven below Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total cost per unit $ 8.58 9.88 1.98 18.88 ($868,880 total) 3.78 4.88 ($344,880 total) $ 37.18 A number of questions relating to the production and sale of Daks follow. Each question Is Independent. Requlred 1-a. Assume that Andretti Company has sufficient capacity to produce 103,200 Daks each year without any Increase In fixed manufacturing overhead costs. The company could increase its unit sales by 20% above the present 86,000 units each year fit were willing to Increase the fixed selling expenses by $120,000. What Is the financlal advantage (disadvantage) of Investing an additional $120,000 In fixed selling expenses? 1-b. Would the additional Investment be Justified? 2 Assume agaln that Andretti Company has sufficlent capacity to produce 103,200 Daks each year. A customer In a forelgn market wants to purchase 17,200 Daks. If Andrettl accepts this order It would have to pay Import dutles on the Daks of $3.70 per unlt and an additional $12,040 for permits and licenses. The only selling costs that would be assoclated with the order would be $2 40 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 are therefore considered to be "seconds." Due to the Irregularltles, It will be Impossible 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 selling price? 4. Due to a strike In its supplier's plant, Andretti Company is unable to purchase more materlal for the production of Daks. The strlke Is expected to last for two months. Andretti Company has enough material on hand to operate at 25% 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 30% 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 financlal advantage (disadvantage) of closing the plant for the two-month period? d. Should Andrettl close the plant for two months? 5. An outside manufacturer has offered to produce 86,000 Daks and shlp them directly to Andrettl's customers. If Andrettl Company accepts this offer, the facilities that It uses to produce Daks would be Idle; however, fixed manufacturing overhead costs would be reduced by 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two- thirds of thelr present amount. What is Andretti'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

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

Auditing For Managers The Ultimate Risk Management Tool

Authors: K. H. Spencer Pickett, Jennifer M. Pickett

1st Edition

0470090987, 978-0470090985

More Books

Students also viewed these Accounting questions

Question

What is the use of bootstrap program?

Answered: 1 week ago

Question

What is a process and process table?

Answered: 1 week ago

Question

What is Industrial Economics and Theory of Firm?

Answered: 1 week ago