Problem 13-18 (Algo) Relevant Cost Analysis in a Variety of Situations [LO13-2, LO13-3, LO13-4] Andretti Company has a single product called a Dak. The company normally produces and sells 89,000 Daks each year at a selling price of $58 per unit. The company's unit costs at this level of activity are given below. A number of questions relating to the production and sale of Daks follow. Each question is independent. Required: 1.3. Assume that Andretti Company has sufficient capacity to produce 115,700 Daks each year without any increase in foxed manufocturing overheed costs. The company could increase its unit sales by 30% above the present 89,000 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 additional $130,000 in fored selling expenses? 1-b. Would the additional investment be justificd? 2. Assume again that Andrett Company has sufficient capacty to produce 115.700 Daks each year. A customer in a foreign market Wants to purchase 26,700 Daks. If Andtoti accepts this order it weuld heve to pay import duties on the Daks of $270 per unit and an oddtional $24,030 for permits and licenses. The only selling costs that would be associated with the order would be $270 per unit shipping cost. What is the break-even price per unit on this order? 3. The company has 500 Daks on thand that have some irregutarities and are therefore considered to be "seconds: "Due to the irregularities. it will be imposs ble to sell these units at the normal peice through regular distribution channels. What is the unit cost figure that is relevant for setting a minimum selling picice? 4. Due to o 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 close its plant down entirely for the two montis. If the plant were closed, fwed manufacturing overthead costs would continue at 35% of their normal level during the two-month petiod and the fixed selling expenses would be leduced by 20% during the two month period. a. How much total contribution margin will Andrett forpo if it closes the plant for two months? b. How mich total fuced cost wa 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. Shouid Andreti close the dlant for two months? 5. An outside manufacturer has offered to prodice 89.000 Daks and ship them directly to Andrettis custamers. If Andretti Company accepts this offer, the facilities that it uses to produce Daks would be lale; however, freed mannutacturing overhend costs would be reduced by 30\%. Hecause the outside manutacturer would poy for all shipping costs, the variable selling expenses would be only two thirds of their pesent amoun. What is Andrettis avoidabse cost per una that it should compare to the price quoted by the outside manulacturer? Complete this question by entering your answers in the tabs below. 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 close its plant down entirely for the two months. If the plant were closed, fixed manufacturing overhead costs 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. (Round number of units prouced to the nearest whole number. Round your intermediate calculations and final answers to 2 decimal places. Any losses or reductions should be indicated by a minus sign.) 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? Complete this question by entering your answers in the tabs below. An outside manufacturer has offered to produce 89,000 Daks and ship them directly to Andretti's customers. If Andretti Company accepts this offer, the faclities that it uses to produce Daks would be ldle; 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 Andrett'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.)
