Problem 11-18 (Algo) Relevant Cost Analysis in a variety of Situations (L011-2, LO11-3, LO11-4) Andretti Company has a single product called a Dok. The company normally produces and sells 87.000 Daks each year at a selling price of $58 per unit. The company's unit costs at this level of activity are given below Direct materials $ 7.50 Direct labor 11.00 Variable manufacturing overhead 2.20 Fixed manufacturing overhead 8.00 (5696,000 total) Variable selling expenses 4.70 Fixed selling expenses 3.60 (5261,000 total) Total cost per unit $36.00 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 108,750 Daks each year without any increase in Nxed manufacturing overhead costs. The company could increase its unit sales by 25% above the present 87000 units each year if it were willing to increase the fixed selling expenses by $150,000. What is the financial advantage (disadvantages of investing an additional $150.000 in fived selling expenses? 1. Would the additional Investment be justified? 2. Assume again that Andretti Company has sufficient capacity to produce 108,750 Daks each year. A customer in a foreign market wants to purchase 21750 Daks. If Andretti accepts this order it would have to pay import duties on the Doks of $470 per unit and an additional $13.050 for permits and licenses. The only selling costs that would be associated with the order would be $160 per unit Shipping cost. What is the break even price per unit on this order? 2. The company has 600 Daks 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 What is the unit cost figure that is relevant for setting a minimum selling price? 4. Due to a strike in its suppliers plant. Andretti Company is unable to purchase more material for the production of Cakes. The strike 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, Bed manufacturing overhead costs would continue at 30% of the normal level during the two month period and the fixed selling expenses would be 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 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 has offered to produce 87.000 Daks and ship them directly to Andrett's customers. Andretti 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 their present amount. What is Andretti's avoldable cost per unit that it should compare to the price quoted by the outside manufacturer? Complete this question by entering your answers in the tabs below. HG LA Reg 10 2 Reg Regato 40 Reg 40 Reg 5 Assume that Andretti Company has sufficient capacity to produce 108,750 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 25% above the present 87.000 units each year i it were willing to increase the food selling expenses by $150,000. What is the financial advantage (disadvantage) of investing an additional $150,000 in fixed selling expenses? Show less Req 18>