Calculation of contribution margin per Dak | ||
Selling price | 58 | |
Less: variable costs | ||
Direct Material | 7.5 | |
Direct Labor | 9 | |
Variable Overhead | 2.3 | |
Variable Selling Expenses | 2.7 | |
Total Variable cost | 21.5 | |
Contribution Margin per Unit | 36.5 | |
1-a Financial Advantage = Additional contribution Margin - Increased expenses | ||
=34,400*36.5– 130,000 = $1,125,600 | ||
1-B yes, since benefit | ||
2.Calculation of break even price | ||
Direct Material | 7.5 | |
Direct Labor | 9 | |
Variable Overhead | 2.3 | |
Import Duties | 3.7 | |
Selling expenses | 2.5 | |
Total variable cost | 25 | |
Break even price = 25 + 17200/34400 = $25.5 | ||
3.Relevant cost is the variable selling expense since manufacturing cost has already been incurred i.e. $2.70 per unit | ||
Operating level = 86,000*25%*2/12 = 3583.33 units | ||
4-a. Contribution margin foregone = 3583.33*36.5 = $130,791.55 | ||
4-b Fixed cost avoided = 688,000*65%*2/12 + 215,000*20%*2/12 = $81,700 | ||
c.Advantage of closing = 81700-130,791.55 = $(49,091.55) i.e. disadvantage | ||
d.No, should not be closed | ||
5.Calculation of avoidable cost | ||
Direct Material | 7.5 | |
Direct Labor | 9 | |
Variable Overhead | 2.3 | |
Avoidable Fixed manufacturing overhead | 2.4 | |
Variable selling expenses avoided | 0.9 | |
Avoidable cost per unit | 22.1 |
Problem 12-18 Relevant Cost Analysis in a variety of Situations (LO12-2, LO12-3, LO12-4] Andretti Company has...
Problem 12-18 Relevant Cost Analysis in a variety of Situations [LO12-2, LO12-3, LO12-4] Andretti Company has a single product called a Dak. The company normally produces and sells 87,000 Daks each year at a selling price of $56 per unit. The company's unit costs at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total cost per unit $ 8.50 11.00 2.60 4.00 ($348,000 total) 2.70...
Problem 12-18 Relevant Cost Analysis in a variety of Situations (L012-2, L012-3, LO12-4) 16 points Andretti Company has a single product called a Dak. The company normally produces and sells 81,000 Doks each year at a selling price of $60 per unit. The company's unit costs at this level of activity are given below. eBook Direct materials Direct labor Variable manufacturing overhead Pixed manufacturing overhand Variable selling expenses Fixed welling expenses Total cost per unit $ 7.50 12.00 2.30 6.00...
Problem 11-18 Relevant Cost Analysis in a variety of Situations (LO11-2, LO11-3, LO11-4] Andretti Company has a single product called a Dak. The company normally produces and sells 80,000 Daks each year at a selling price of $58 per unit. The company's unit costs at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total cost per unit $ 6.50 11.00 2.10 8.00 $640,000 total) 2.70...
Problem 11-18 Relevant Cost Analysis in a Variety of Situations [LO11-2, L011-3, L011-4) Andretti Company has a single product called a Dak. The company normally produces and sells 121,000 Daks each year at a selling price of $48 per unit. The company's unit costs at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Pixed selling expenses Total cost per unit 6.50 11.00 2.80 3.00 ($363,000 total) 4.70 4.50...
Problem 11-18 Relevant Cost Analysis in a variety of Situations (LO11-2, LO11-3, LO11-4) Andretti Company has a single product called a Dak. The company normally produces and sells 123.000 Daks each year at a selling price of $46 per unit. The company's unit costs at this level of activity are given below. $ 7.50 Direct materials Direct labor Variable manufacturing overhead Pixed facturing overhead Variable selling expenses Fixed selling expenses Total cost per unit 2.20 4.00 (5492.000 total) 6.50 (5799.500...
ACTIVITY I Practice Problems Help Problem 12-18 Relevant Cost Analysis in a Variety of Situations [L012-2, LO12-3, LO12-4] Andretti Company has a single product called a Dak. The company normally produces and sells 81,000 Daks each year at a selling price of $62 per unit. The company's unit costs at this level of activity are given below: points s 9.50 Direct labor 10.00 3.40 8.00 ($648,000 total) 2.70 Variable manufacturing overhead Fixed manufacturing overhead 3.00 Fixed selling expenses 3.00 ($243,000...
Andretti Company has a single product called a Dak. The company normally produces and sells 82,000 Daks each year at a selling price of $60 per unit. The company's unit costs at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total cost per unit $ 8.50 10.00 2.70 7.00 ($574,000 total) 1.70 3.00 ($246,000 total) $32.90 A number of questions relating to the production and...
Andretti Company has a single product called a Dak. The company normally produces and sells 80,000 Daks each year at a selling price of $56 per unit. The company's unit costs at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total cost per unit $ 8.50 10.00 2.80 9.00 ($720,000 total) 2.70 4.00 ($320,000 total) $37.00 A number of questions relating to the production and...
Problem 12-18 Relevant Cost Analysis in a Variety of Situations [L012-2, LO12-3, LO12-4] Andretti Company has a single product called a Dak. The company normally produces and sells 86,000 Daks each year at a selling price of $60 per unit. The company's unit costs at this level of activity are given below: Direct materials $ 9.50 Direct labor 10.00 Variable manufacturing overhead 2.00 Fixed manufacturing overhead ($774,000 total) 9.00 Variable selling expenses 2.70 4.00 ($344, 000 total) Fixed selling expenses...
Andretti Company has a single product called a Dak. The company normally produces and sells 80,000 Daks each year at a selling price of $54 per unit. The company’s unit costs at this level of activity are given below: Direct materials $ 8.50 Direct labor 8.00 Variable manufacturing overhead 1.80 Fixed manufacturing overhead 9.00 ($720,000 total) Variable selling expenses 1.70 Fixed selling expenses 4.50 ($360,000 total) Total cost per unit $ 33.50 A number of questions relating to the production...