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Andretti Company has a single product called a Dak. The company normally produces and sells 90,000 Daks each year at a sellin

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Answer #1
Solution 1-a:
Computation of Contribution Margin per unit
Selling price per unit 60.00
Less: variable expenses:
Direct materials 7.50
Direct labor 8.00
Variable manufacturing Overhead 3.10
Variable selling expense 2.70 21.30
Contribution margin per unit 38.70
Increased Sales In units (90000*30%) 27000
Contribution margin per unit $38.70
Incremental Contribution margin $1,044,900.00
Less: Added Fixed selling expense $130,000.00
Incremental Net Operating Income $914,900.00
Solution 1-b:
Yes, Additional investment would be justified.
Solution 2:
Variable Manufacturing Cost per unit $18.60
Import Duties per unit $2.70
Permits and licenses ($21,600/27000) $0.80
Shipping cost per unit $2.20
Break even price per unit $24.30
Solution 3:
Relevant unit cost (Variable selling expesne) $2.70
Solution 4: (a, b, c, d)
Units for two months (90000*25%*2/12) 3750
Contribution margin per unit $39
Contribution margin forgone (a) $145,125
Fixed costs:
Fixed manufacturing overhead cost (720000*2/12*65%) $78,000
Fixed selling cost ($270000*2/12*20%) $9,000
Total Fixed cost Avoidance (b) $87,000
Net Advantage (disadvantage) of closing the plant (c )= b-a -$58,125
Should Andretti close the plant for Two months? (d) No
Solution 5:
Variable manufacturing cost 18.60
Fixed manufacturing overhead cost ($8*30%) 2.40
Variable selling expense ($3*1/3) 1.00
Total Costs Avoided 22.00
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