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Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 50,000 Rets per year. Costs associated with this level of production and sales are given below:

irect materials	$	15			$	750,000
Direct labor		8				400,000
Variable manufacturing overhead		3				150,000
Fixed manufacturing overhead		9				450,000
Variable selling expense		4				200,000
Fixed selling expense		6				300,000
Total cost	$	45			$	2,250,000

The Rets normally sell for $50 each. Fixed manufacturing overhead is $450,000 per year within the range of 42,000 through 50,000 Rets per year.

Required:

1. Assume that due to a recession, Polaski Company expects to sell only 42,000 Rets through regular channels next year. A large retail chain has offered to purchase 8,000 Rets if Polaski is willing to accept a 16% discount off the regular price. There would be no sales commissions on this order; thus, variable selling expenses would be slashed by 75%. However, Polaski Company would have to purchase a special machine to engrave the retail chains name on the 8,000 units. This machine would cost $16,000. Polaski Company has no assurance that the retail chain will purchase additional units in the future. What is the financial advantage (disadvantage) of accepting the special order?

4 Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 50,000 Rets per year. Costs associated with this level of production and sales are given below 14.28 points Unit Total Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense Total cost 15 750,000 400,000 150,000 450,000 200,000 300,000 $2,250,000 eBook $ 45 Print The Rets normally sell for $50 each. Fixed manufacturing overhead is $450,000 per year within the range of 42,000 through 50,000 Rets per year References Required 1. Assume that due to a recession, Polaski Company expects to sell only 42,000 Rets through regular channels next year. A large retail chain has offered to purchase 8,000 Rets if Polaski is willing to accept a 16% discount off the regular price. There would be no sales commissions on this order, thus, variable selling expenses would be slashed by 75%. However, Polaski Company would have to purchase a special machine to engrave the retail chain's name on the 8,000 units. This machine would cost $16,000. Polaski Company has no assurance that the retail chain will purchase additional units in the future. What is the financial advantage (disadvantage) of accepting the special order

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