Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the...
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Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 46,000 Rets per year. Costs associated with this level of production and sales are given below: Unit Total Direct materials $ 26 $ 926,666 Direct labor 6 276,666 Variable manufacturing overhead 3 138,666 Fixed manufacturing overhead 9 414,666 Variable selling expense 4 184,666 Fixed selling expense 6 276,666 Total cost $ 48 $ 2,268,666 The Rets normally sell for $53 each. Fixed manufacturing overhead is $414,000 per year within the range of 39,000 through 46,000 Rets per year. 2. Refer to the original data. Assume again that Polaski Company expects to sell only 39,000 Rets through regular channels next year. The US. Army would like to make a one-time-only purchase of 7,000 Rets. The Army would reimburse Polaski for all of the variable and fixed production costs assigned to the units by the company's absorption costing system, plus it would pay an additional fee of $1.20 per unit. Because the army would pick up the Rets with its own trucks, there would be no variable selling expenses associated with this order. What is the financial advantage (disadvantage) of accepting the US. Army's special order
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