Please answer Questions 4 and 5 All answers shown are correc

Please answer Questions #4 and #5. All answers shown are correct.

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 348 per unit. The company\'s unit costs at this level of activity are given below Direct materias Direct labor ariable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total cost per unit 3 6.50 2.00 1.80 8.00 (5688,000 total) 3.70 4.50 (5307,000 total) S 36.50 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 sufficent capacitv to produce 111.800 Daks each year without any Increase in fixed manufacturing overhead costs. The company could increase its sales by 3 were willing to increase the fxed selling expenses by 5120,000. Calculate the incremental net operating Income. (Round your answers to the nearest whole number.) % above the present 86,000 units each year if it Increased sales in units Contribution margin per unit Incremental contribution margin Less added fixed selling expense Incremental net operating income 25,800 S 24 00 619,200 00 120,00000 499,200 00 1-b. Would the Increased foed selling expenses be justmed? Yes No

Solution

4.

5.

Contribution Margin Lost ( 86,000 units x 2/12 x 25 % x $ 24.00)		- $   86,000
Fixed Costs
Fixed Manufacturing Overhead Cost ( $ 688,000 x 2/12 x 65 %)	$ 74,533
Fixed Selling Cost ( $ 387,000 x 2/12 x 20% )	12,900	87,433
Net Advantage ( Disadvantage ) of closing the plant		$ 1,433