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Andretti Company has a single product called a Dak. The company normally produces and sells 60.000 Daks each year at a selling price of $32 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: 14a. Assume that Andretti Company has sutficient 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% pbove the present 60.000 units each year if it were willing to increase the fixed selling expenses by $80,000. What is the financtal advantage (disadvantage) of investing an additionat $80,000 in fixed selling expenses? 1.b. Would the additional investment be justified? 2. Assume again that Andretu Company has sufficient capacity to produce 90,000 Daks each year. A customer in a foreign market Wants to purchase 20,000 Daks. If Andrett accepts this order it would have to pay impott duties on the Daks of 5170 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 5hipping 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 "seconcis" Due to the. ifregularites, it will be impossible to 5ell 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, Andretu 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 60% 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 Andretticlose the plant for two months? 5. An outside manufacturer has offered to produce 60.000 Daks and ship them directly to Andrett's customers. If Andretu Company accepts this offer, the facilities that it uses to produce Daks would be idie; however, fixed manufacturing overhead costs would be reduced by 75%. Because the outside manufacturer would pay for all shipping costs, the varable selling expenses would be only two thirds of their present amount. What is Andreti's avoldable cost per unit that it should compare to the price quoted by the outside. manufacturer

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