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1 Andretti Company has a single product called a Dak. The company normaly produces and sells 60,000 Daks each year at a seling price of $32 per unit. The company's unit costs at this level of activity are given below Direct aateale Direct lsber $ 10.00 4.50 2.30 5.00 (3300,000 total) 1.20 350 (120.000 tot al) 3:50 28 overhea Fised wduring evethead. Variah Fixed selling e tit al eset per ai. 1ne spereem 1 350 oea A number of questions relating to the production and sale of Daks follow. Each question is independent Required: 1-a Assume that Andretti Company has sufficient capacity to produce 90000 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 25 % above the present 60000 unts each year if t were willing to increase the fxed selling expenses by $80,000 What is the financial advantage (disadvantage) of invessing an additional $80,000 in fxed seling expenses? 1-b. Would the addnional investment be justified? 2 Assume agan that Andretti Company has suficient capacty to produce 90,000 Daks each year A customer in a foreign market wants to purchase 20000 Daks. If Andrets 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 associaned with the order would be $3 20 per unit shipping cost. What is the break even price per unit on this oeder? 3. The company has 1,000 Daks on hand that have some irregularties and are therefore considered to be "seconds. Due to the iregularties, 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, 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 30% of normal levels for the two-month period. As an alternative, Andretti could close ts plant down entrely for the two months, If the plant were closed foxed manufacturing overhead costs would continue at 60% of their normal level during the two-month period and the fied selng 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 t 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? ine rences S. An outside manufacturer has offered to produce 60,000 Daks and ship them deectly to Andrett's custonmers if Andretti Company accepts this offer, the facilities that it uses to produce Daiks would be idle: howevet 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 Andrets's avoidable cost per unit that it should compare so the price quoted by the outside manufacturer? Complete this question by entering your answers in the tabs below Reg 1A Req 18 Reg 25 Reg 3 Reg 44 to 4C Rig 40 Reg 3 Assume that Andretti Company has suffidieht capacity to produce 90,000 Caks each year wthout any increase in Red manufacturing overhead costs. The cormpany could increase its unit sales by 25% above the present 60,000 units each year if t were willing to increase the fixed seling expenses by s00,000, What is the inandal advantage (disadvantage) of investing an addtional seo.000 in fixed selling expenses? Req 18 1 Andretti Company has a single product called a Dak. The company normaly produces and sells 60,000 Daks each year at a seling price of $32 per unit. The company's unit costs at this level of activity are given below 166 5irect nateriale Direct Isher 10.00 4.50 2.30 5.00 (300.000 tet al) points Tariable sufatng ovechead ced navd acturing ovecheadi int wpeneem Fied nlline expmers 0 000 tutal) Tot al eset per ait $ 26.50 A number of questions relating to the production and sale of Daks follow Each guestion is independent Required 1-a. Assume that Andretti Company has sufficient capacity to produce 90.000 Daks each year without any increase in foxed manufacturing overhead costs. The company could increase its unit sales by 25 % above the present 60,000 units each year if it were wiling to increase the fixed selling expenses by $80.000. What is the financial advantage (disadvantage) of investing an addronal $80.000 in fixed seling expenses? 1-b. Would the addnional investment be justified? 2 Assume again that Andretti Company has sufficient capacty 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 dutles 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 iregularties and are therefore considered to be "seconds Due to the- inregularities, 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, Andretti Company is unable to purchase more material for the producson 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-monthe 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 60% of their normal les reduced by 20% during the two-month period a. How much total contribution margin wil Andretti forgo if it closes the plant for two monthsh 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 References the two-m ocd nd the foed selling expenses would be 5. An outside manufacturer has offered to produce 60,000 Daks and ship them directly to Andretti's customers. f Andretti Company accepts this offer, the facilisies that it uses to produce Daks would be idle, however, foed 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 manufacturer? Complete this question by entering yoar answers in the tabs below Rig 1A Req 18 Reg 2 Reg 3 Req 4A to 4C Reg 40 Reg S Assume that Andretti Company has suficieht capadity manufacturing overhead costs. The company could increase its unit sales by 25% above the present 60.000 units each vear if it were wiling to increase the fixed seling expenses by $e0,000, Would the additional investment be justifed o produce 90,000 Daks each year without any increase in faed Yes ONo

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