Problem 11-18 Relevant Cost Analysis in a variety of Situations (LO11-2, LO11-3, LO11-4) Andretti Company has a single product called a Dak. The company normally produces and sells 85,000 Daks each year at a selling price of $60 per unit. The company's unit costs at this level of activity are given below. 11.08 Direct materiais Direct labor Variable manutacturing rechead Tixed manufacturing overhead Variable welling expenses Tied welling expenses Total coat per unit 9.00 $763,000 total) 3.70 3.00 15255,000 total) 535.00 A number of questions relating to the production and sale of Daks follow. Each question is independent Required: 1a. Assume that Andretti Company has sufficient capacity to produce 110,500 Dalcs each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 30% above the present 85,000 units each year if it were willing to increase the fixed seling expenses by $110.000. What is the financial advantage (disadvantage of Investing an additional $110,000 in fixed selling expenses? 1-6. Would the additional investment be justified? 2. Assume again that Andretti Company has sufficient capacity to produce 110,500 Daks each year. A customer in a foreign market wants to purchase 25,500 Daks. If Andretti accepts this order it would have to import duties on the Daks of $4.70 per unit and an additional $20,400 for permits and licenses. The only selling costs that would be associated with the order would be $2.30 per unit shipping cost. What is the break-even price per unit on this order? 3. The company has 900 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 seling price? 4. Due to a strike in its supplier's plant, Andrettl 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 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, foed 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 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? S. An outside manufacturer has offered to produce 95,000 Daks and ship them directly to Andretti's customers. I Andretti Company accepts this offer, the facilities that it uses to produce Dalcs 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 seling expenses would be only two thirds of their present amount. What is Andretti's avoidable 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. R 1A Reg18 Req2 Reg 3 Raq 44 to 4C Re 40 RES Assume that Andretti Company has sufficient capacity to produce 110,500 Dals each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 30% above the present 85,000 units each year if it were willing to increase the fixed selling expenses by $110,000. What is the finandal advantage (disadvantage) of investing an additional $110,000 in fixed selling expenses? Show less Reg 3 RA Reg 18 Reg 2 Rey 4 to 4C Req4D Rugs Assume that Andretti Company has sufficient capacity to produce 110,500 Dals each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 30% above the present 85,000 units each year if it were willing to increase the fixed selling expenses by $110,000. Would the additional investment be justified? Yus ONO RA Reg 13 Reg 2 Reg 3 Raq 4 to 40 Re 40 Rugs Assume again that Andretti Company has sufficient capacity to produce 110,500 Dals cach year. A customer in a foreign market wants to purchase 25,500 Dalcs. If Andretti accepts this order it would have to pay import duties on the Daks of $4.70 per unt and an additional $20,400 for permits and licenses. The only selling costs that would be associated with the order would be $2.30 per unit shipping cost. What is the break-even price per unit on this order? (Round your answers to 2 decimal places.) Show less Break-even price per unit Req1A Reg 18 Reg 2 Reg 3 Reg A to 4C Reg 40 Reqs The company has 900 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 unt cost figure that is relevant for setting a minimum selling price? (Round your answer to 2 decimal places.) Relevant unit.cat por un RA Reg 18 R2 Reg 3 Wwwwwwww Ruq 4 to 4C Reg 40 Reqs 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 25% of normal levels for the two-month period. As an alternative, Andretti could dose 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 floved selling expenses would be reduced by 20% during the two month period. (Round number of units produced to the nearest whole number. Round your intermediate calculations and final answers to 2 decimal places. Any losses/reductions should be indicated by a minus sign.) a. How much total contribution margin wil Andretti forgo if it doses the plant for two months? D. How much total fixed cost wil the company avoid if it does the plant for two months? c. What is the financial advantage (disadvantage) of closing the plant for the two-month period? Show less Forgone contribution margin Total avoidable fixed costs Financial advantage disadvantage Req1A Reg 18 Reg 2 Reg 3 Rug A to 4C Reg4D Reqs 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 25% of normal levels for the two month period. As an alternative, Andretti could dose 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 faced selling expenses would be reduced by 20% during the two month period. Should Andretti close the plant for two months? Show less Oyus | Ono Req1A Reg 18 Raq 2 Reg Raq 4A to 4C Req4D Reqs An outside manufacturer has offered to produce 85,000 Daks and ship the directly to Andretti's customers. If Andretti Company accepts this offer, the facilities that it uses to produce Daks would be idle, however, foved 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 avoidable cost per unit that it should compare to the price quoted by the outside manufacturer? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Show less Avoidable cost per unit