Andretti Company has a single product called a Dak. The company normally produce
ID: 2478573 • Letter: A
Question
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 $48 per unit. The company's unit costs at this level of activity are given below: A number of questions relating to the production and sale of Daks follow. Each question is independent. Assume that Andretti Company has sufficient capacity to produce 111,800 Daks each year without any An outside manufacturer has offered to produce Daks and ship them directly to Andretti's customers. If Andretti Company accepts this offer, the facilities that it uses to produce Daks would be idle; however, fixed manufacturing overhead costs would be reduced by 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two-thirds of their present amount. Compute the unit cost that is relevant for comparison to the price quoted by the outside manufacturer. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Variable manufacturing costs Fixed manufacturing overhead cost Variable selling expense Total costs avoidedExplanation / Answer
Particluars
Amout
No of Units
86,000
Variable Manufacturing Cost:
Direct Material
7.5
Direct Labor
10
Variable Manufacturing overhead
3.5
Total Variable Manufacturing Cost Per Unit
21
Total Variable Manufacturing Cost @ 21 for 111,800 units
$ 2,347,800
Fixed Manufacturing ovehead @ 30%
$ 206,400
Variable Selling Expenses @ 4.5 x 1/3 for 111,800 units
$ 167,700
Variable Manufacturing Cost
$ 2,347,800
Fixed Manufacturing ovehead Cost
$ 206,400
Variable Selling Expenses
$ 167,700
Total Cost can be avoided
$ 2,721,900
Particluars
Amout
No of Units
86,000
Variable Manufacturing Cost:
Direct Material
7.5
Direct Labor
10
Variable Manufacturing overhead
3.5
Total Variable Manufacturing Cost Per Unit
21
Total Variable Manufacturing Cost @ 21 for 111,800 units
$ 2,347,800
Fixed Manufacturing ovehead @ 30%
$ 206,400
Variable Selling Expenses @ 4.5 x 1/3 for 111,800 units
$ 167,700