13 CHAPTER 13 Andretti Company has a single product called a Dak. The company normally produces and sellis89.000 Dachy price of $58 per unit. The company's unit costs at this level of activity we given below. 1 $9.50 10.00 Direct Materials Direct labor Variable manufacturing over Fixed manufacturing overhead Variable sellise Fived selling total cost per unit 6.00 $534,000 total) 4.0 350 $111.00 total $1.50 A number of questions relating to the production and sale of Daks follow. Each question is dependent Required: - Assume that Andretti Company has sufficient capacity to produce 115.700 Daks each year without any increase infined manufacturing overhead costs. The company could increase its unit sales by 30% above the present 89.000 units each year it were willing to increase the fixed selling expenses by $120.000 What is the financial advantage disadvantage of investing and $120,000 in fixed selling expenses? 1-b. Would the additional Investment be justified? 2. Assume again that Andretti Company has sufficient capacity to produce 115.700 Daks each year Acistomer in a foreign market wants to purchase 26.700 Daks. If Andretti accepts this order it would have to pay import duties on the Doks of $270 perust and an additional $21.360 for permits and licenses. The only selling costs that would be associated with the order would be $1.30 per un shipping cost. What is the break-even price per unit on this order? 3. The company has 600 Daks on hand that have some irregularities and are therefore considered to be seconde Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What is the cost figure that is relevant for setting a minimum selling price? 4. Due to a strike in its supplier's plant, Andretti Company is unable to purchase more material for the production of Daks. The 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 dosed, fed matching overhead costs would continue at 35% of their normal level during the two-month period and the feed 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? 1 of 1 !!! Next