Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

aduct called a Ret. Operating at capacity, the company can produce and sell Polaski Company manufactures and sells a single product called a Ret. Operating

image text in transcribed
aduct called a Ret. Operating at capacity, the company can produce and sell Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the 44,000 Rets per year. Costs associated with this level of production and sales are given below: The Rets normally sell for $51 each. Fixed manufacturing overhead is $308,000 per year within the range of 36,000 through 44,000 Rets per yeat Required: 1. Assume that due to a recession, Polaski Company expects to sell only 36,000 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 retall chain will purchase additional units in the future. What is the financial advantage (disadvantage) of accepting the special ordet? (Round your intermediate calculations to 2 decimal places.) 2. Refer to the originol data. Assume again that Polaski Company expects to sell only 36,000 Rets through regular channeis next year. The US. Army would like to make a one-time-only purchase of 8,000 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 $1.40 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 U.S. Army's special order? 3. Assume the same situation as described in (2) above, except that the company expects to sell 44,000 Rets through regular channels next year. Thus, accepting the U.S. Army's order would require giving up regular sales of 8,000 Rets. Given this new information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing A Business Risk Approach

Authors: Larry E. Rittenberg, Karla Johnstone, Audrey Gramling

7th Edition

0324663722, 978-0324663723

More Books

Students also viewed these Accounting questions

Question

What does the R stand for in an R-by-C table?

Answered: 1 week ago

Question

How does that affect your approach to complaint handling?

Answered: 1 week ago