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Andretti Company has a single product called Dak. The company normally produces and sells 86,000 Daks each year at a selling price of $58 per unit. The company's unit costs at this level of activity are given below:Direct materials - $7.50 Direct labor - $9.00 ariable manufacturing overhead - $2.50Fixed manufacturing overhead - $6.00 ($516,000 total) Variable selling expenses - $1.70 Fixed selling expenses - $4.00 ($344,000 total) Total cost per unit - $30.70Assume that Andretti Company has sufficient capacity to produce 107,500 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 25% above the present 86,000 units each year if it were willing to increase the fixed selling expenses by $140,000. What is the financial advantage (disadvantage) of investing an additional $140,000 in fixed selling expenses? Would the additional investment be justified? Agnew Corporation uses a standard cost system. The following information was provided for the period that just ended: Actual price per kilogram Actual kilograms of material used $ 1.76 61,500 $ 20.60 8,850 Actual hourly labor rate Actual hours of production Standard price per kilogram $ 1.80 Standard kilograms per completed unit 5 kilograms Standard hourly labor rate $ 20 Standard time per completed unit 3/4 hr. Actual total factory overhead $ 64,500 Fixed factory overhead $ 30,000 Standard fixed factory overhead rate Standard variable factory overhead rate Maximum plant capacity Plant operated during the period Units completed during the period $3 per labor hour $5 per labor hour 10,000 hours 9,000 hours The variable factory overhead controllable variance is: 12,000 a. $10,500 favorable b. $7,500 favorable c. $7,500 unfavorable b. d. $10,500 unfavorable

Andretti Company has a single product called Dak. The company normally produces and sells 86,000 Daks each year at a selling price of $58 per unit. The company's unit costs at this level of activity are given below:Direct materials - $7.50 Direct labor - $9.00 ariable manufacturing overhead - $2.50Fixed manufacturing overhead - $6.00 ($516,000 total) Variable selling expenses - $1.70 Fixed selling expenses - $4.00 ($344,000 total) Total cost per unit - $30.70Assume that Andretti Company has sufficient capacity to produce 107,500 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 25% above the present 86,000 units each year if it were willing to increase the fixed selling expenses by $140,000. What is the financial advantage (disadvantage) of investing an additional $140,000 in fixed selling expenses? Would the additional investment be justified? Agnew Corporation uses a standard cost system. The following information was provided for the period that just ended: Actual price per kilogram Actual kilograms of material used $ 1.76 61,500 $ 20.60 8,850 Actual hourly labor rate Actual hours of production Standard price per kilogram $ 1.80 Standard kilograms per completed unit 5 kilograms Standard hourly labor rate $ 20 Standard time per completed unit 3/4 hr. Actual total factory overhead $ 64,500 Fixed factory overhead $ 30,000 Standard fixed factory overhead rate Standard variable factory overhead rate Maximum plant capacity Plant operated during the period Units completed during the period $3 per labor hour $5 per labor hour 10,000 hours 9,000 hours The variable factory overhead controllable variance is: 12,000 a. $10,500 favorable b. $7,500 favorable c. $7,500 unfavorable b. d. $10,500 unfavorable

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter6: Activity-based, Variable, And Absorption Costing
Section: Chapter Questions
Problem 1PB: Bobcat uses a traditional cost system and estimates next years overhead will be $800.000, as driven...
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Andretti Company has a single product called Dak. The company normally produces and sells 86,000 Daks each year at a selling price of $58 per unit. The company's unit costs at this level of activity are given below:Direct materials - $7.50 Direct labor - $9.00 ariable manufacturing overhead - $2.50Fixed manufacturing overhead - $6.00 ($516,000 total) Variable selling expenses - $1.70 Fixed selling expenses - $4.00 ($344,000 total) Total cost per unit - $30.70Assume that Andretti Company has sufficient capacity to produce 107,500 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 25% above the present 86,000 units each year if it were willing to increase the fixed selling expenses by $140,000. What is the financial advantage (disadvantage) of investing an additional $140,000 in fixed selling expenses? Would the additional investment be justified? Agnew Corporation uses a standard cost system. The following information was provided for the period that just ended: Actual price per kilogram Actual kilograms of material used $ 1.76 61,500 $ 20.60 8,850 Actual hourly labor rate Actual hours of production Standard price per kilogram $ 1.80 Standard kilograms per completed unit 5 kilograms Standard hourly labor rate $ 20 Standard time per completed unit 3/4 hr. Actual total factory overhead $ 64,500 Fixed factory overhead $ 30,000 Standard fixed factory overhead rate Standard variable factory overhead rate Maximum plant capacity Plant operated during the period Units completed during the period $3 per labor hour $5 per labor hour 10,000 hours 9,000 hours The variable factory overhead controllable variance is: 12,000 a. $10,500 favorable b. $7,500 favorable c. $7,500 unfavorable b. d. $10,500 unfavorable
Transcribed Image Text:Andretti Company has a single product called Dak. The company normally produces and sells 86,000 Daks each year at a selling price of $58 per unit. The company's unit costs at this level of activity are given below:Direct materials - $7.50 Direct labor - $9.00 ariable manufacturing overhead - $2.50Fixed manufacturing overhead - $6.00 ($516,000 total) Variable selling expenses - $1.70 Fixed selling expenses - $4.00 ($344,000 total) Total cost per unit - $30.70Assume that Andretti Company has sufficient capacity to produce 107,500 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 25% above the present 86,000 units each year if it were willing to increase the fixed selling expenses by $140,000. What is the financial advantage (disadvantage) of investing an additional $140,000 in fixed selling expenses? Would the additional investment be justified? Agnew Corporation uses a standard cost system. The following information was provided for the period that just ended: Actual price per kilogram Actual kilograms of material used $ 1.76 61,500 $ 20.60 8,850 Actual hourly labor rate Actual hours of production Standard price per kilogram $ 1.80 Standard kilograms per completed unit 5 kilograms Standard hourly labor rate $ 20 Standard time per completed unit 3/4 hr. Actual total factory overhead $ 64,500 Fixed factory overhead $ 30,000 Standard fixed factory overhead rate Standard variable factory overhead rate Maximum plant capacity Plant operated during the period Units completed during the period $3 per labor hour $5 per labor hour 10,000 hours 9,000 hours The variable factory overhead controllable variance is: 12,000 a. $10,500 favorable b. $7,500 favorable c. $7,500 unfavorable b. d. $10,500 unfavorable
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