Andretti Company has a single product called a Dak. The company normally produces and sells 85,000 Daks each year at a selling price of $48 per unit. The company’s unit costs at this level of activity are given below: Direct materials $ 6.50 Direct labor 9.00 Variable manufacturing overhead 3.30 Fixed manufacturing overhead 9.00 ($765,000 total) Variable selling expenses 3.70 Fixed selling expenses 4.50 ($382,500 total) Total cost per unit $ 36.00 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 110,500 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its sales by 30% above the present 85,000 units each year if it were willing to increase the fixed selling expenses by $150,000. Calculate the incremental net operating income. (Round your answers to the nearest whole number.) Increased sales in units Contribution margin per unit Incremental contribution margin Less added fixed selling expense Incremental net operating income 2. Assume again that Andretti Company has sufficient capacity to produce 110,500 Daks each year. A customer in a foreign market wants to purchase 25,500 Daks. Import duties on the Daks would be $2.70 per unit, and costs for permits and licenses would be $20,400. The only selling costs that would be associated with the order would be $1.80 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 unit Import duties per unit Permits and licenses Shipping cost per unit Break-even price per unit 3. The company has 500 Daks on hand that have some irregularities and are therefore considered to be "seconds." Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What unit cost figure is relevant for setting a minimum selling price? (Round your answer to 2 decimal places.) Relevant unit cost per unit

Andretti Company has a single product called a Dak. The company normally produces and sells 85,000 Daks each year at a selling price of $48 per unit. The company’s unit costs at this level of activity are given below: Direct materials $ 6.50 Direct labor 9.00 Variable manufacturing overhead 3.30 Fixed manufacturing overhead 9.00 ($765,000 total) Variable selling expenses 3.70 Fixed selling expenses 4.50 ($382,500 total) Total cost per unit $ 36.00 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 110,500 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its sales by 30% above the present 85,000 units each year if it were willing to increase the fixed selling expenses by $150,000. Calculate the incremental net operating income. (Round your answers to the nearest whole number.) Increased sales in units Contribution margin per unit Incremental contribution margin Less added fixed selling expense Incremental net operating income 2. Assume again that Andretti Company has sufficient capacity to produce 110,500 Daks each year. A customer in a foreign market wants to purchase 25,500 Daks. Import duties on the Daks would be $2.70 per unit, and costs for permits and licenses would be $20,400. The only selling costs that would be associated with the order would be $1.80 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 unit Import duties per unit Permits and licenses Shipping cost per unit Break-even price per unit 3. The company has 500 Daks on hand that have some irregularities and are therefore considered to be "seconds." Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What unit cost figure is relevant for setting a minimum selling price? (Round your answer to 2 decimal places.) Relevant unit cost per unit

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 1PB: The following product costs are available for Stellis Company on the production of erasers: direct...

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Direct materials	$	6.50
Direct labor		9.00
Variable manufacturing overhead		3.30
Fixed manufacturing overhead		9.00	($765,000 total)
Variable selling expenses		3.70
Fixed selling expenses		4.50	($382,500 total)
Total cost per unit	$	36.00

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 110,500 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its sales by 30% above the present 85,000 units each year if it were willing to increase the fixed selling expenses by $150,000. Calculate the incremental net operating income. (Round your answers to the nearest whole number.)


Increased sales in units
Contribution margin per unit
Incremental contribution margin
Less added fixed selling expense
Incremental net operating income

2. Assume again that Andretti Company has sufficient capacity to produce 110,500 Daks each year. A customer in a foreign market wants to purchase 25,500 Daks. Import duties on the Daks would be $2.70 per unit, and costs for permits and licenses would be $20,400. The only selling costs that would be associated with the order would be $1.80 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 unit
Import duties per unit
Permits and licenses
Shipping cost per unit
Break-even price per unit

3. The company has 500 Daks on hand that have some irregularities and are therefore considered to be "seconds." Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What unit cost figure is relevant for setting a minimum selling price? (Round your answer to 2 decimal places.)

Relevant unit cost

per unit

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