Polaski Company manufactures and sells a single product called aRet. Operating at capacity, the...

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Polaski Company manufactures and sells a single product called aRet. Operating at capacity, the company can produce and sell 48,000Rets per year. Costs associated with this level of production andsales are given below: Unit Total Direct materials $ 15 $ 720,000Direct labor 6 288,000 Variable manufacturing overhead 3 144,000Fixed manufacturing overhead 7 336,000 Variable selling expense 4192,000 Fixed selling expense 6 288,000 Total cost $ 41 $ 1,968,000The Rets normally sell for $46 each. Fixed manufacturing overheadis $336,000 per year within the range of 43,000 through 48,000 Retsper year. Required: 1. Assume that due to a recession, PolaskiCompany expects to sell only 43,000 Rets through regular channelsnext year. A large retail chain has offered to purchase 5,000 Retsif Polaski is willing to accept a 16% discount off the regularprice. There would be no sales commissions on this order; thus,variable selling expenses would be slashed by 75%. However, PolaskiCompany would have to purchase a special machine to engrave theretail chain’s name on the 5,000 units. This machine would cost$10,000. Polaski Company has no assurance that the retail chainwill purchase additional units in the future. What is the financialadvantage (disadvantage) of accepting the special order? (Roundyour intermediate calculations to 2 decimal places.) 2. Refer tothe original data. Assume again that Polaski Company expects tosell only 43,000 Rets through regular channels next year. The U.S.Army would like to make a one-time-only purchase of 5,000 Rets. TheArmy would pay a fixed fee of $1.40 per Ret, and it would reimbursePolaski Company for all costs of production (variable and fixed)associated with the units. Because the army would pick up the Retswith its own trucks, there would be no variable selling expensesassociated with this order. What is the financial advantage(disadvantage) of accepting the U.S. Army's special order? 3.Assume the same situation as described in (2) above, except thatthe company expects to sell 48,000 Rets through regular channelsnext year. Thus, accepting the U.S. Army’s order would requiregiving up regular sales of 5,000 Rets. Given this new information,what is the financial advantage (disadvantage) of accepting theU.S. Army's special order?

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Solution 1 Selling Price for special order 46 4616 46 736 3864 Computation of profit from special order Polaski company Particulars Amount Sales 50003864 19320000 Variable Cost Direct material 500015 7500000 Direct labor 50006 3000000 Variable See Answer

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In: AccountingPolaski Company manufactures and sells a single product called aRet. Operating at capacity, the company...Polaski Company manufactures and sells a single product called aRet. Operating at capacity, the company can produce and sell 48,000Rets per year. Costs associated with this level of production andsales are given below: Unit Total Direct materials $ 15 $ 720,000Direct labor 6 288,000 Variable manufacturing overhead 3 144,000Fixed manufacturing overhead 7 336,000 Variable selling expense 4192,000 Fixed selling expense 6 288,000 Total cost $ 41 $ 1,968,000The Rets normally sell for $46 each. Fixed manufacturing overheadis $336,000 per year within the range of 43,000 through 48,000 Retsper year. Required: 1. Assume that due to a recession, PolaskiCompany expects to sell only 43,000 Rets through regular channelsnext year. A large retail chain has offered to purchase 5,000 Retsif Polaski is willing to accept a 16% discount off the regularprice. There would be no sales commissions on this order; thus,variable selling expenses would be slashed by 75%. However, PolaskiCompany would have to purchase a special machine to engrave theretail chain’s name on the 5,000 units. This machine would cost$10,000. Polaski Company has no assurance that the retail chainwill purchase additional units in the future. What is the financialadvantage (disadvantage) of accepting the special order? (Roundyour intermediate calculations to 2 decimal places.) 2. Refer tothe original data. Assume again that Polaski Company expects tosell only 43,000 Rets through regular channels next year. The U.S.Army would like to make a one-time-only purchase of 5,000 Rets. TheArmy would pay a fixed fee of $1.40 per Ret, and it would reimbursePolaski Company for all costs of production (variable and fixed)associated with the units. Because the army would pick up the Retswith its own trucks, there would be no variable selling expensesassociated with this order. What is the financial advantage(disadvantage) of accepting the U.S. Army's special order? 3.Assume the same situation as described in (2) above, except thatthe company expects to sell 48,000 Rets through regular channelsnext year. Thus, accepting the U.S. Army’s order would requiregiving up regular sales of 5,000 Rets. Given this new information,what is the financial advantage (disadvantage) of accepting theU.S. Army's special order?