Please solve for required 1-5 in image. Provide explanation of answers. Examples using excel preferred.
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Andretti | ||
Variable cost per unit | Note | |
Direct Materials | 6.50 | A |
Direct Labor | 9.00 | B |
Variable Manufacturing overhead | 2.00 | C |
Variable Selling Expenses | 2.70 | D |
Total Variable cost per unit | 20.20 | E=A+B+C+D |
Sell Price Per unit | 58.00 | F |
Contribution Per unit | 37.80 | G=F-E |
Number of Units | 88,000.00 | H |
Contribution amount | 3,326,400.00 | I=G*H |
Fixed cost | ||
Fixed manufacturing overhead | 704,000.00 | J |
Fixed selling expenses | 352,000.00 | K |
Total Fixed cost | 1,056,000.00 | L=J+K |
Net Income | 2,270,400.00 | M=I-L |
Ans 1 a | ||
Increase in Units | 30,800.00 | N=H*30% |
Contribution Per unit | 37.80 | G |
Contribution Amount | 1,164,240.00 | O=N*G |
Extra selling expenses | 110,000.00 | P |
Net Income | 1,054,240.00 | Q=O-P |
Ans 1 b | ||
The net income will increase by $ 1,054,240 so yes the additional investment is justified. | ||
Ans 2- Foreign Market | ||
Total Variable cost per unit | 20.20 | E |
Less: Present Variable Selling Expenses | 2.70 | D |
Add: Shipping costs | 2.60 | |
Add: Import Duties | 3.70 | |
Revised Variable cost per unit | 23.80 | R |
Additional permits and licenses | 21,560.00 | S |
Number of units | 30,800.00 | N |
Permits and licenses cost per unit | 0.70 | T=S/N |
Break-even price per unit | 24.50 | U=R+T |
Ans 3- Seconds Units | ||
Only Variable unit cost figure is relevant for setting a minimum selling price. Here as the units are seconded so Andretti may also not incur variable selling expenses. So relevant variable cost per unit will be- $ 20.20- $ 2.70= $ 17.50. | ||
Total relevant Variable cost per unit of $ 17.50 is the relevant minimum selling price. | ||
Ans 4 a | Plant close | |
Number of units | 14,666.67 | V=H/12*2 |
Contribution Per unit | 37.80 | G |
Contribution lost | 554,400.00 | W=U*G |
Ans 4 b | ||
Savings in Fixed manufacturing overhead by 70% | (82,133.33) | X=J/12*2*60% |
Savings in Fixed selling expenses by 20% | (11,733.33) | Y=K/12*2*20% |
Total fixed cost to be avoided | (93,866.67) | |
Net Financial disadvantage of closing the plant | 460,533.33 | Z=W+X+Y |
Ans 4 c | 25% capacity | |
Number of units | 3,666.67 | AA=H/12*2*25% |
Contribution Per unit | 37.80 | G |
Contribution earned | 138,600.00 | AB=AA*G |
Fixed manufacturing overhead | 117,333.33 | AC=J/12*2 |
Fixed selling expenses | 58,666.67 | AD=K/12*2 |
Net Financial advantage at 25% capacity | 37,400.00 | AE=AB-AC-AD |
Ans 4 d | ||
So Andretti should not close the plant for two months but operate it at 25% capacity. | ||
Ans 5 | ||
Variable cost per unit | ||
Direct Materials | 6.50 | A |
Direct Labor | 9.00 | B |
Variable Manufacturing overhead | 2.00 | C |
Variable Selling Expenses | 0.90 | AF=D*1/3 |
Total avoidable Variable cost per unit | 18.40 | AG=A+B+C+AF |
Fixed cost | ||
Avoidable Fixed manufacturing overhead by 30% | (211,200.00) | AH=J*30% |
Number of Units | 88,000.00 | H |
Avoidable Fixed manufacturing overhead per unit | (2.40) | AI=AH/H |
Avoidable cost per unit | 16.00 | AJ=AG+AI |
Please solve for required 1-5 in image. Provide explanation of answers. Examples using excel preferred. Andretti...
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