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Andretti Company has a single product called a Dak. The company normally produces and sells 88,000 Daks each year at a selling price of $62 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-a. Assume that Andretti Company has sufficient capacity to produce 114,400 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 30% above the present 88,000 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 fixed selling expenses? 1-b. Would the additional investment be justified? 2. Assume again that Andretti Company has sufficient capacity to produce 114.400 Daks each year. A customer in a foreign market wants to purchase 26,400 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $4.70 per unit and an additional $18,480 for permits and licenses. The only selling costs that would be associated with the order would be $1.60 per unit shipping cost. What is the break-even price per unit on this order? 3. The company has 500 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, Andretti Company is unable to purchase more materlal 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. 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 88,000 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, fixed manufacturing overhead costs would be 3. The compary tios 500 Daks on hand that have some leregulariles and are therefore considered to be "seconds. "Due to the inegularities, it will be impossible to sell these units at the normal picice theough regular distribution channeis, What is the une cost figure that is relevant for setting a mininum selling price? 4. Due to a strike in its supplier's plant. Andiett Company is unable to purchase more material for the production of Daks. The strke is expected to last for two mooths. Andreti Company has enough muterial en hand to operate at 25% of normal levels for the two-mionth period. As an atternative. Andretil could ciose its plant down entirely for the two months. If the pisnt were closed, ficed manutacturing overhead costs would continue at 35s of their normal level during the two-month period and the fiacd selling expenses would be reduced by 20% during the two-month period. a. How much total contribution margin wis Andeett forgo if it closes the plant for two months? b. How much total fixed cost will the company ovold if it closes the plant for two months? c. What is the financial advantage (disadvantagel 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 88.000 Daks and ship them directly to Andreti's cusiomers. If Ardreti Compary accepts this offer, the facilities that it uses to produce Daks would be idio, however, fixed manulacturing overhead costs would be reduced by 30x. Because the outside mamifacturer would poy for all shipping costs, the varibble selling experses woild be only twothirds of their present amount. What is Andretti's avoidable cost per unit that in should compare to the price quoted by the outside manafacturer? Complete this question by entering your answers in the tabs below. Assume that Andreta Company has sufficient capaoty to produce 114,400 Dais eadi year without any increase in fixed manufocturing overhead costs. The company could increase its unt wals by 30 bs above the present 68,000 units cach year if It were wiling to increase the fixed seling expenses by 5130,000 , what is the firanclal advartage (disadyantage) of imverting an additional $130,000 in fised selling expenses

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