BCOR 2120: Acct. Info. for Decision Making Chapter 13 Practice Handout Special Order Decision: Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 30,000 Rets per year. Costs associated with this level of production and sales are given below: The Rets normally sell for $50 each. Fixed manufacturing overhead is $270,000 per year. Required: 1. Assume only 25,000 Rets are expected to sell next year. A retailer has offered to purchase 5,000 Rets at a 16% discount. There would be no sales commissions on this order; thus, variable selling expenses would be slashed by 75%. A $10,000 special machine needs to be purchased to engrave the retailer's name on the 5,000 units. There is no assurance the retailer will buy additional units in the future. What is the financial advantage (disadvantage) of accepting the special order? 2. Refer to the original data. Assume only 25,000 Rets are expected to sell next year. The U.S. Army would like to make a one-time-only purchase of 5,000 Rets. The Army would reimburse for all of the variable and fixed production costs assigned to the units using absorption costing, plus it would pay a fee of $1.80 per unit. No variable selling expenses will be 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), except that the company expects to sell 30,000 Rets next year. Given this new information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order