Andretti Company has a single product called a Dak. The company normally produces and sells 87,000 Daks each year at a selling price of $60 per unit. The company’s unit costs at this level of activity are given below:
Direct materials $ 7.50
Direct labor 9.00
Variable manufacturing overhead 2.70
Fixed manufacturing overhead 7.00 ($609,000 total)
Variable selling expenses 2.70
Fixed selling expenses 3.50 ($304,500 total)
Total cost per unit $ 32.40
Required:1-a. Assume that Andretti Company has sufficient capacity to produce 121,800 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 40% above the present 87,000 units each year if it were willing to increase the fixed selling expenses by $110,000. What is the financial advantage (disadvantage) of investing an additional $110,000 in fixed selling expenses?b. Would the additional investment be justified?2. Assume again that Andretti Company has sufficient capacity to produce 121,800 Daks each year. A customer in a foreign market wants to purchase 34,800 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $3.70 per unit and an additional $27,840 for permits and licenses. The only selling costs that would be associated with the order would be $2.60 per unit shipping cost. What is the break-even price per unit on this order?