Question

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:

Direct materials	$	10.00
Direct labor		4.50
Variable manufacturing overhead		2.30
Fixed manufacturing overhead		5.00	($300,000 total)
Variable selling expenses		1.20
Fixed selling expenses		3.50	($210,000 total)
Total cost per unit	$	26.50

A number of questions relating to the production and sale of Daks follow. Each question is independent.

Required: 1-a Assume that Andretti Company has sutticent capacity to produce 90.000 Da s each year nou any increase in d man ac urin o er e a costs. T e company could increase s saes by 5% ab e e ese each year if it were willing to increase the fixed selling expenses by $80,000 Calclate the incremental net operating income oo units Increased sales in units Contribution margin per unit Incremental contribution margin Less added fixed selling expense Incremental net operating income 1-b. Would the increased fixed selling expenses be justified? Yes O No 2. Assume again that Andretti or pa ny has suf cient capacity o produce 9 0 0 Daks each year. A custom er n a e market wants o urchase 2 00?? al s. mp t i es ont e a swould e per un and costs r permits and licenses would be $9.000. The only selling costs that would be associated with the order would be $3.20 per unit shipping cost. Compute the per unit break-even price on this order. (Round your answers to 2 decimal places.) Variable manufacturing cost per u Import duties per unit Permits and licenses Shipping cost per unit Break-even price per unit nit 0.00

Answer 1

And 0tfi company The clo would inacase it soles by 2sl, above Peating nromo Inaeased soles im Units oninbutfon magin pe unit Tnoemented conmbu ton mawan ess: added fixed selling expene 000 5000 2 10000 CAxB) Tnouas ed Sale 60000 x 25% -15000 bleooud be the inae se ustified 2 yes O NO ΕΝΊΟΤΕ yes because there is amet incu mental aba HH 2l Foreign mki wonts to ruachase 20000 Daki ー-impon dutiei on dak 51:70 Pu costat eerite lic $9000 Golling ost oode 5 920 fes Unit shipping cos 16-8 Pemilicanse g009/20000 shipping cost PesUn asean even price re-ont 22-1S Veiable manu foctusurg cost1O S2.3 16-8

3 The clo has 1aoa Daks 'seronds cohat Unit cost olevant for selling a minimum Solling Price 2 Relevan+ unit cost 5 16.8 Fes 0nit NOTE: Relevant cost will bo eaual to a-sable cosh as the distibution cannot be mada thuagh Normol dismbuton chonnels

Andextti company hool enough matoiol to Rexiod Eixed cost continue 601 at the n enri__axodーSellng expenses aducea by 2001 2000 tontabution masein Jos Eixed cost Fixed sellimg Pxp Company has enough materal to opea 30 60000210000 mibs iD 2 monthi it toould have operote than contai bu hon mag 3000 x $ 14 Pe Uni 42000 contabuhion musin is a losh sinde it has choose to dlose the depaiment fo 2 mon Fixed cost 300000 x 60% Fixed selling Exp-coill be xedued by 20 Ayed selling exp 210,000 4 2000 Reducod by 20 2 8000 ー-Both-the-fixed-Cost-00uldーalso, be-a-tosi-as ant Is close Fo achwity coill bo done months So no Produchion If Plan iS close fur 2 monis they coill toose (entribu in g Beau the fixed expenses fos o Unit Paodo

Page No Date S an outside monu facuved has altereol 1o Produc directly DOKSIShipーthem cer facilites coill b idle Fixed monulecu I onco ould be ta duced by ts Ocaseiable selling fee would ho only-an Pusehase the unit cost thot con Puschasod fhom the ouitside monulacuze 、 avoided . Tt outside manuectuad Poduco Doka there lu be no Vasable exfensex Fixed monuracuneduod by cost Can be avoideo Vaioble selling exp voill be /ie va is avold ed Tos thot can be avoideo axioble manufaCHUmg (ot 1003000 Fixed monufocHuwng oH 22500O yooo NaNoble- selling expenses vati oble manufccrusu'ザ OH -16.g x 60000 i 10 08,000 225000 / 24000 -