(1)

a.

Volume 82000 106600
Selling price \$46.00 \$46.00
Direct materials \$6.50 \$6.50
Direct labor \$9.00 \$9.00
Variable selling expenses \$2.70 \$2.70
Contribution margin per unit \$25.30 \$25.30
Total contribution margin \$2,074,600 \$2,696,980
Fixed selling expenses \$369,000 \$499,000
Total profit \$1,377,600 \$1,869,980
82,000 x 1.30 = 106,000

Note that when the volume increases to 106,000, the profit is \$1,869,980. Therefore the financial advantage is (\$1,869,980 – \$1,377,600) = \$492,380.
https://d2vlcm61l7u1fs.cloudfront.net/media%2Fece%2Fecec4a54-be95-4e62-a4da-a30f5f57f722%2FphpE9hkOE.png
b.

The additional investment is justified as there is a financial advantage of \$492,380.

(2)

Sales volume = 24,600; Fixed cost for permits and licenses = \$19,680
So, per unit basis fixed cost = 19680/24600 = \$0.80

Direct materials \$6.50
Direct labor \$9.00
Variable shipping cost \$2.10
Fixed cost for permits and licenses \$0.80
Import duty \$2.70
Total cost \$23.60
So, breakeven selling price = total cost per unit = \$23.60

(3)

Direct materials \$6.50
Direct labor \$9.00

So, the minimum cost that goes with these parts directly and which should be recovered = \$6.5+\$9+\$2.5 = \$18

(4)

a.

Yearly contribution margin (found in part-1) = \$2,074,600
25% of this is \$518,650
Bi-monthly contribution margin that will be foregone = \$518,650 / 6 = \$86,441.67

b.

Fixed cost that can be avoided = (\$328,000/6) x 60% + (\$369,000/6) x 80% = \$82,000

c.

Disadvantage of \$86,441.67 – \$82,000 = \$4,441.67

(5)

Avoidable direct materials \$6.50
Avoidable direct labor \$9.00