Seanch View Favtites Took Hel Optios w Ch. 12 Comprehensive Problem Help Save &E

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Seanch View Favtites Took Hel Optios w Ch. 12 Comprehensive Problem Help Save &Exit; Problem 12-18 Relevant Cost Analysis in a Variety of Situations [L012-2, LO12-3, LO012-4) Andretti Company has a single product calied a Dak The company normally peoduices and sells B5,000 Daks each year at a selling price of $62 per unit The company's unit costs at this level of activey are given below 100 Direct materials Direct labor Variable manfacturig 9.00 (5600,000 Fixed nanufacturing overhnad Reference variable selling expen8H8 (5344, 000 Zotal cost P A number of questions relating to the production and sale of Daks follow Each question is Type here to searc

Explanation / Answer

ans 1a in $ Increase in sales revenue (86000*40%*62) 2132800 Additional variable cost 811840 (8.5+9+3.4+2.7)*(86000*40%) Increase in Profit 1320960 Less: Increase in fixed selling expenses 140000 Financial advantage 1180960 ans ans 1b Yes it is justified Ans 2 Break even price per unit Direct material $8.50 Direct labor 9 Variable Manufacturing overhead 3.4 Import duties 1.7 Variable selling expenses 2.1 Permits 27520/34400 0.80 Ans 2 Break even price per unit $25.50 ans 3 Relevant unit cost is the variable selling expenses as it needs to be incurred to sell. $2.7 is relevant ans 4 Production 86000/12*25%*2 months 3583 Contribution margin forgone 137600 ans 4a (62-(8.5+9+3.4+2.7))*3583 4b Fixed cost avoided Fixed manufacturing overhead 688000/12*2 months*65% 74533 Fixed selling expenses 344000/12*2*20% 11467 Total fixed cost avoided 86000 ans 4b 4c Contribution margin forgone 137600 Less: Fixed cost avoided Fixed manufacturing overhead 74533 Fixed selling expenses 11467 86000 Financial disadvantage ans 4c -51600 ans 4d No he should not close the plant Ans 5 Avoidable cost per unit Variable Manufacturing cost (8.5+9+3.4) 20.9 Fixed manufacturing overhead (8*30%) 2.4 Variable selling expenses 2.7*1/3 0.90 Avoidable cost per unit 24.20 If any doubt please comment

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