Problem 7-18 Relevant Cost Analysis in a Variety of Situations [LO 7-2, LO 7-3, LO 7-4]

Andretti Company has a single product called a Dak. The company normally produces and sells 83,000 Daks each year at a selling price of $44 per unit. The companys unit costs at this level of activity are given below:

Direct materials $ 6.50

Direct labor 8.00

Variable manufacturing overhead 2.30

Fixed manufacturing overhead 6.00 ($498,000 total)

Variable selling expenses 4.70

Fixed selling expenses 4.50 ($373,500 total)

Total cost per unit $ 32.00

A number of questions relating to the production and sale of Daks follow. Each question is independent.

4. Due to a strike in its suppliers 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%. What would be the impact on profits of closing the plant for the two-month period? (Any losses should be indicated by a minus sign. Round all calculations (intermediate and final) to whole numbers. Round unit calculations to whole numbers.)

ock Your Work Google Chrome tomheducation.com/hmtpx 4. 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, foxed 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%. What would be the impact on profits of closing the plant for the two-month period? (Any losses should be indicated by a minus sign. Round all calculations (intermediate and final) to whole numbers. Round unit calculations to whole numbers.) Answer is complete but not entirely correct. (77,813) Contribution margin lost Fixed costs Fixed manufacturing overhead cost Fored song cost Net advantage (disadvantage of closing the $ 53,950 s = 5. An outside manufacturer has offered to produce Daks and ship them directly to Andretti's customers. If Andretti Company accepts this offer the facilities that it uses to produce Daks would be idle, however, forced 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 Compute the unit cost that can be avoided if purchased from the outside manufacturer. (Do not round intermediate calculations. Round your answer to 2 decimal places. Answer is complete and correct. A d11333 PM