Andretti Company has a single product called a Dak. The company normally produce
ID: 2498127 • Letter: A
Question
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 $44 per unit. The company’s unit costs at this level of activity are given below:
Assume that Andretti Company has sufficient capacity to produce 98,400 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its sales by 20% above the present 82,000 units each year if it were willing to increase the fixed selling expenses by $130,000. Calculate the incremental net operating income. (Round all dollar amounts to 2 decimal places.)
Assume again that Andretti Company has sufficient capacity to produce 98,400 Daks each year. A customer in a foreign market wants to purchase 16,400 Daks. Import duties on the Daks would be $2.70 per unit, and costs for permits and licenses would be $14,760. The only selling costs that would be associated with the order would be $1.50 per unit shipping cost. Compute the per unit break-even price on this order. (Round your answers to 2 decimal places.)
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 $44 per unit. The company’s unit costs at this level of activity are given below:
Explanation / Answer
Workings: Selling price per unit 44 Direct materials 8.5 Direct labor 11 Variable manufacturing overhead 2.2 Variable manufacturing cost per unit 21.7 Variable selling expenses 4.7 Total Variable cost 26.4 (21.7+4.7) Contribution margin per unit 17.6 1-a) Increased sales in units 16,400 (82000*20%) Contribution margin per unit 17.6 Incremental contribution margin 288,640 Less added fixed selling expense 130,000 Incremental net operating income 158,640 1- b) yes as the net operating income is positive 2) Variable manufacturing cost per unit 21.7 Import Duties per unit 2.7 Shipping cost 1.5 Total variable cost 25.9 Permits and licenses 14,760 purchase quantity 16,400 Fixed cost per unit 0.90 Break even price per unit 26.80 (.9+25.9)