problem-23 flexible budget and spending variances
ebook Print Required: 1-a Assume that Andretti Company has sufficient capacity to produce 90.000 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 25% above the present 60,000 units each year if it were willing to increase the fixed selling expenses by $80.000. What is the financial advantage disadvantage) of investing an additional $80,000 in fixed selling expenses? 1-b Would the additional investment be justified? 2 Assume again that Andretti Company has sufficient capacity to produce 90.000 Daks each year. A customer in a foreign market wants to purchase 20.000 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $170 per unit and an additional $9,000 for permits and licenses. The only selling costs that would be associated with the order would be $3 20 per unit shipping cost. What is the break even price per unit on this order? 3 The company has 1.000 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 supplier's plant. Andrett 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 30% 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 50% of their normal level during the two-month period and the fixed selling expenses would be reduced by 205 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 60,000 Daks and ship them directly to Andretti's customers. If Andrett Company accepts this offer the facilities that it uses to produce Daks would be idle, however, foxed manufacturing overhead costs would be reduced by 75% 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 ebook Print Required: 1-a Assume that Andretti Company has sufficient capacity to produce 90.000 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 25% above the present 60,000 units each year if it were willing to increase the fixed selling expenses by $80.000. What is the financial advantage disadvantage) of investing an additional $80,000 in fixed selling expenses? 1-b Would the additional investment be justified? 2 Assume again that Andretti Company has sufficient capacity to produce 90.000 Daks each year. A customer in a foreign market wants to purchase 20.000 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $170 per unit and an additional $9,000 for permits and licenses. The only selling costs that would be associated with the order would be $3 20 per unit shipping cost. What is the break even price per unit on this order? 3 The company has 1.000 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 supplier's plant. Andrett 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 30% 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 50% of their normal level during the two-month period and the fixed selling expenses would be reduced by 205 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 60,000 Daks and ship them directly to Andretti's customers. If Andrett Company accepts this offer the facilities that it uses to produce Daks would be idle, however, foxed manufacturing overhead costs would be reduced by 75% 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
