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Problem 12-22 Accept or Reject a Special Order L012-4] 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: Unit Total Direct materials 20 1,000,000 500,000 Direct labor 10 Variable manufacturing overhead 150,000 Fixed manufacturing overhead 250,000 100,000 Variable selling expense Fixed selling expense 300,000 46 2,300,000 Total cost The Rets normally sell for $51 each. Fixed manufacturing overhead is constant at $250.000 per vear within the range of 41,000 through 50,000 Rets per year. Required: 1. Assume that due to a recession, Polaski Company expects to sell only 41,000 Rets through regular channels next year A large retail chain has offered to purchase 9,000 Rets if Polaski is willing to accept a discount 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 9,000 units. This machine would cost $18,000. Polaski Company has no assurance that the retail chain will purchase additional units in the future. Determine the impact on profits next year if this special order is accepted. et profit

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