Check my work Andretti Company has a single product called a Dak. The company no
ID: 2554717 • Letter: C
Question
Check my work Andretti Company has a single product called a Dak. The company normally produces and sells 83,000 Daks each year at a selling price of $56 per unit. The company's unit costs at this level of activity are given below: oints Direct materials Direct labor Variable nanufacturing overhead Fixed manufacturing overhead Variable selling expenses Pixed selling expenses Total cost per unit $ 7.50 10.00 2.00 9.00 ($747,000 total) eBook Print References 1.70 300 ($249,000 total) $33.20 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 sufficient capacity to produce 112,050 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 35% above the present 83,000 units each year if it were willing to Increase the fixed selling expenses by $140,000 What is the financial edvantage (disadvantage) of investingExplanation / Answer
1-a. Financial advantage if the proposal is accepted = $870,940.
Net operating income with the proposal = $2,763,340
Present net operating income = $1,892,400
Financial advantage = $870,940
Working:
1-b. The aditional investment will be justified.
2. Break-even price for this order = $24.00 per unit.
Working:
3. Unit cost price relevant to fix selling price for the damaged Daks = $19.50
Working:
4.
Contribution forgone if the plant is closed = $120,350
Working:
b. Savings in fixed costs if the plant is closed = $513,770.
Working:
c. Financial advantage / (disadvantage) of closing the plant for two monhts = $393,420
Working:
Present Proposed Activity - units 83000 112050 Per unit Total Per unit Total Sales 56 4648000 56.00 6274800 Variable expenses: Direct material 7.50 622500 7.50 840375 Direct labor 10.00 830000 10.00 1120500 Maufacturing overhead 2.00 166000 2.00 224100 Selling Expenses 1.70 141100 1.70 190485 Total variable expenses 21.20 1759600 21.20 2375460 Contribution margin 34.80 2888400 34.80 3899340 Fixed Expenses: Manufacturing expenses 747000 747000 Selling Expenses 249000 389000 Total fixed expenses 996000 1136000 Net operating income 1892400 2763340