Solution 1-a: | ||
Computation of Contribution Margin per unit | ||
Selling price per unit | 60.00 | |
Less: variable expenses: | ||
Direct materials | 8.50 | |
Direct labor | 11.00 | |
Variable manufacturing Overhead | 2.20 | |
Variable selling expense | 3.70 | 25.40 |
Contribution margin per unit | 34.60 | |
Increased Sales In units (80000*20%) | 16000 | |
Contribution margin per unit | 34.6 | |
Incremental Contribution margin | 553600 | |
Less: Added Fixed selling expense | 120000 | |
Incremental Net Operating Income | 433600 | |
Solution 1-b: | ||
Yes, Additional investment would be justified. | ||
Solution 2: | ||
Variable Manufacturing Cost per unit | 21.70 | |
Import Duties per unit | 4.70 | |
Permits and licenses ($12800/16000) | 0.80 | |
Shipping cost per unit | 1.60 | |
Break even price per unit | 28.80 | |
Solution 3: | ||
Relevant unit cost (Variable selling expesne) | 3.70 | |
Solution 4: (a, b, c, d) | ||
Units for two months (80000*25%*2/12) | 3333 | |
Contribution margin per unit | 34.60 | |
Contribution margin forgone (a) | 115322 | |
Fixed costs: | ||
Fixed manufacturing overhead cost ($480000*2/12*65%) | 52000 | |
Fixed selling cost ($320000*2/12*20%) | 10667 | |
Total Fixed cost Avoidance | 62667 | |
Net Advantage (disadvantage) of closing the plant (c )= b-a | -52655 | |
Should Andretti close the plant for Two months? (d) | No | |
Solution 5: | ||
Variable manufacturing cost | 21.70 | |
Fixed manufacturing overhead cost ($6*30%) | 1.80 | |
Variable selling expense ($3.70*1/3) | 1.23 | |
Total Costs Avoided | 24.73 |
Save & Exit Andretti Company has a single product called a Dak. The company normally produces...
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