[Question & Answer] Andretti Company has a single product called a Dak. The company normally produces and sells 60,000 Daks eac…..

Andretti Company has a single product called a Dak. The company normally produces and sells 60,000 Daks each year at a selling price of $32 per unit. The company’s unit costs at this level of activity are given below $10.00 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses 4.50 2.30 5.00 ($300,000 total) 1.20 3.50 ($210,000 total) Total cost per unit $26.50 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 sufficient capacity to produce 90,000 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its sales by 25% above the present 60,000 units each year if it were willing to increase the fixed selling expenses by $80,000 Calculate the incremental net operating income. Increased sales in units Contribution margin per unit Incremental contribution margin Less added fixed selling expense Incremental net operating income 15,000 14 $ 210,000 (80,000) $130,000