Andretti Company has a single product called a Dak. The companynormally produces and sells 86,000 Daks each year at a sellingprice of $60 per unit. The company’s unit costs at this level ofactivity are given below: Direct materials $ 8.50 Direct labor10.00 Variable manufacturing overhead 2.50 Fixed manufacturingoverhead 5.00 ($430,000 total) Variable selling expenses 1.70 Fixedselling expenses 3.00 ($258,000 total) Total cost per unit $ 30.70A number of questions relating to the production and sale of Daksfollow. Each question is independent. Required: 1-a. Assume thatAndretti Company has sufficient capacity to produce 107,500 Dakseach year without any increase in fixed manufacturing overheadcosts. The company could increase its unit sales by 25% above thepresent 86,000 units each year if it were willing to increase thefixed selling expenses by $150,000. What is the financial advantage(disadvantage) of investing an additional $150,000 in fixed sellingexpenses? 1-b. Would the additional investment be justified? 2.Assume again that Andretti Company has sufficient capacity toproduce 107,500 Daks each year. A customer in a foreign marketwants to purchase 21,500 Daks. If Andretti accepts this order itwould have to pay import duties on the Daks of $2.70 per unit andan additional $12,900 for permits and licenses. The only sellingcosts that would be associated with the order would be $1.70 perunit shipping cost. What is the break-even price per unit on thisorder? 3. The company has 700 Daks on hand that have someirregularities and are therefore considered to be "seconds." Due tothe irregularities, it will be impossible to sell these units atthe normal price through regular distribution channels. What is theunit cost figure that is relevant for setting a minimum sellingprice? 4. Due to a strike in its supplier’s plant, Andretti Companyis unable to purchase more material for the production of Daks. Thestrike is expected to last for two months. Andretti Company hasenough material on hand to operate at 25% of normal levels for thetwo-month period. As an alternative, Andretti could close its plantdown entirely for the two months. If the plant were closed, fixedmanufacturing overhead costs would continue at 40% of their normallevel during the two-month period and the fixed selling expenseswould be reduced by 20% during the two-month period. a. How muchtotal contribution margin will Andretti forgo if it closes theplant for two months? b. How much total fixed cost will the companyavoid if it closes the plant for two months? c. What is thefinancial advantage (disadvantage) of closing the plant for thetwo-month period? d. Should Andretti close the plant for twomonths? 5. An outside manufacturer has offered to produce 86,000Daks and ship them directly to Andretti’s customers. If AndrettiCompany accepts this offer, the facilities that it uses to produceDaks would be idle; however, fixed manufacturing overhead costswould be reduced by 30%. Because the outside manufacturer would payfor all shipping costs, the variable selling expenses would be onlytwo-thirds of their present amount. What is Andretti’s avoidablecost per unit that it should compare to the price quoted by theoutside manufacturer?