olaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 5,000 Rets per year. Costs associated with this level of production and sales are given below: The Rets normally sell for $53 each. Fixed manufacturing overhead is $252,000 per year within the range of 31,000 through 36,000 Rets per year. Required: 1. Assume that due to a recession, Polaski Company expects to sell only 31,000 Rets through regular channels next year. A large retail chain has offered to purchase 5,000 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 5,000 units. This machine would cost $10,000. 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? (Round your intermediate calculations to 2 decimal places.) 2. Refer to the original data. Assume again that Polaski Company expects to sell only 31,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 5,000 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 $2.00 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? 2. Refer to the original data. Assume again that Polaski Company expects to sell only 31,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 5,000 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 $2.00 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 36,000 Rets through regular channels next year. Thus, accepting the U.S. Army's order would require giving up regular sales of 5,000 Rets. Given this new information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order? Superior Markets, Incorporated, operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below: The North Store has consistently shown losses over the past two years. For this reason, management is giving consideration to closing the store. The company has asked you to make a recommendation as to whether the store should be closed or kept open. The following additional information is available for your use: a. The breakdown of the selling and administrative expenses that are shown above is as follows: b. The lease on the building housing the North Store can be broken with no penalty. c. The fixtures being used in the North Store would be transferred to the other two stores if the North Store were closed. d. The general manager of the North Store would be retained and transferred to another position in the company if the North Store were closed. She would be filling a position that would otherwise be filled by hiring a new employee at a salary of $14,960 per quarter. The general manager of the North Store would continue to earn her normal salary of $16,320 per quarter. All other managers and employees in the North store would be discharged. e. The company has one delivery crew that serves all three stores. One delivery person could be discharged if the North Store were closed. This person's salary is $5,440 per quarter. The delivery equipment would be distributed to the other stores. The equipment managers and employees in the North store would be discharged. e. The company has one delivery crew that serves all three stores, One delivery person could be discharged if the North Store were closed. This person's salary is $5,440 per quarter. The delivery equipment would be distributed to the other stores. The equipment does not wear out through use, but does eventually become obsolete. f. The company pays employment taxes equal to 15% of their employees' salaries. 9. One-third of the insurance in the North Store is on the store's fixtures. h. The "General office salaries" and "General office-other" relate to the overall management of Superior Markets, Incorporated. If the North Store were closed, one person in the general office could be discharged because of the decrease in overall workload. This person's compensation is $8,160 per quarter. Required: 1. How much employee salaries will the company avoid if it closes the North Store? 2. How much employment taxes will the company avoid if it closes the North Store? 3. What is the financial advantage (disadvantage) of closing the North Store? 4. Assuming that the North Store's floor space can't be subleased, would you recommend closing the North Store? 5. Assume that the North Store's floor space can't be subleased. However, let's introduce three more assumptions. First, assume that if the North Store were closed, on -fourth of its sales would transfer to the East Store, due to strong customer loyalty to Superior Markets. Second, assume that the East Store has enough capacity to handle the increased sales that would arise from closing the North Store. Third, assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as present sales in the East store. Given these new assumptions, what is the financial advantage (disadvantage) of closing the North Store? Complete this question by entering your answers in the tabs below. Complete this question by entering your answers in the tabs below. How much employee salaries will the company avoid if it closes the North Stor 3. What is the financial advantage (disadvantage) of closing the North Store? 4. Assuming that the North Store's floor space can't be subleased, would you recom 5. Assume that the North Store's floor space can't be subleased. However, let's intro the North Store were closed, one-fourth of its sales would transfer to the East Store, Markets. Second, assume that the East Store has enough capacity to handle the incr North Store. Third, assume that the increased sales in the East Store would yield the present sales in the East store. Given these new assumptions, what is the financial a Store? Complete this question by entering your answers in the tabs below. How much employment taxes will the company avoid if it closes the North Store? 3. What is the financial advantage (disadvantage) of closing the North Store? 4. Assuming that the North Store's floor space can't be subleased, would you recommend 5. Assume that the North Store's floor space can't be subleased. However, let's introduce the North Store were closed, one-fourth of its sales would transfer to the East Store, due t Markets. Second, assume that the East Store has enough capacity to handle the increasec North Store. Third, assume that the increased sales in the East Store would yield the same present sales in the East store. Given these new assumptions, what is the financial advanta Store? Complete this question by entering your answers in the tabs below. What is the financial advantage (disadvantage) of closing the North Store? (Enter any "disadva What is the financial advantage (disadvantage) of closing the North Store? Assuming that the North Store's floor space can't be subleased, would you recommend closing the North Store? Assume that the North Store's floor space can't be subleased. However, let's introduce three more assumptions. First, as: ie North Store were closed, one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to Supe larkets. Second, assume that the East Store has enough capacity to handle the increased sales that would arise from closi lorth Store. Third, assume that the increased sales in the East Store would yield the same gross margin as a percentage of resent sales in the East store. Given these new assumptions, what is the financial advantage (disadvantage) of closing the Store? Complete this question by entering your answers in the tabs below. Assume that the North Store's foor space can't be subleased. However, let's introduce three more assumptions. First, assume that if the North Store were closed, one-fourth cf its sales would transfer to the East store, due to strong customer loyalty to Superior Markets. Second, assume that the East Store has enough capacity to handie the increased sales that would arise from closing the North Store. Third, assume that the increased sales in the East store would yield the same gross margin as a percentage of sales as present sales in the East store. Given these new assumptions, what is the financial advantage (disadvantage) of closing the North Store? (Enter any "disadvantages" as a negative value.) Come-Clean Corporation produces a variety of cleaning compounds and solutions for both industrial and household use. While most of its products are processed independently, a few are related, such as the company's Grit 337 and its Sparkle silver polish. Grit 337 is a coarse cleaning powder with many industrial uses. It costs $1.60 a pound to make, and it has a selling price of $2.80 a pound. A small portion of the annual production of Grit 337 is retained in the factory for further processing. It is combined with several other ingredients to form a paste that is marketed as Sparkle silver polish. The silver polish sells for $4.00 per jar. This further processing requires one-fourth pound of Grit 337 per jar of silver polish. The additional direct variable costs involved in the processing of a jar of silver polish are: Overhead costs associated with processing the silver polish are: reet labor cost The production supervisor has no duties other than to oversee production of the silver polish. The mixing equipment is specialpurpose equipment acquired specifically to produce the silver polish. It can produce up to 12,000 jars of polish per month. its resale value is negligible and it does not wear out through use. Advertising costs for the silver polish total $3,500 per month. Variable selling costs associated with the silver pollish are 5% of sales, Due to a recent decline in the demand for silver polish, the company is wondering whether its continued production is advisable. The sales manager feels that it would be more profitable to sell all of the Grit 337 as a cleaning powder. sales manager feels that it would be more profitable to sell all of the Grit 337 as a cleaning powder. Required: 1. How much incremental revenue does the company earn per jar of polish by further processing Grit 337 rather than selling it as a cleaning powder? (Round your answer to 2 decimal places.) 2. How much incremental contribution margin does the company earn per jar of polish by further processing Grit 337 rather than selling it as a cleaning powder? (Round your intermediate calculations and final answer to 2 decimal places.) 3. How many jars of silver polish must be sold each month to exactly offset the avoidable fixed costs incurred to produce and sell the polish? (Round your intermediate calculations to 2 decimal places.) 4. If the company sells 8,400 jars of polish, what is the financial advantage (disadvantage) of choosing to further process Grit 337 rather than selling it as a cleaning powder? (Enter any "disadvantages" as a negative value. Round your intermediate calculations to 2 decimal places.) 5. If the company sells 11,100 jars of polish, what is the financial advantage (disadvantage) of choosing to further process Grit 337 rather than selling is as a cleaning powder? (Enter any "disadvantages" as a negative value. Round your intermediate calculations to 2 decimal places.) Data Exhibit 13-7 Santa Maria Wool Cooperative Enter a formula into each of the cells marked with a ? below Example: Joint Product Costs and the Contribution Approach Analysis of the profitability of the overall operation: Combined final sales value 25 Less costs of producing the end products: Analysis of sell or process further: Final sales value after further processing Less sales value at the spiti-off point Incremental revenue from further processing Less cost of further processing (dyeing) Financial advantage (disadvantage) of further processing 2. In industries that process joint products, the costs of the raw materials inputs and the sales values of intermediate and final products are often volatile. Change the data area of your worksheet to match the following: f your formulas are correct, you should get the correct answers to the following questions. a. What is the overall profit if all intermediate products are processed into final products? b. What is the financial advantage (disadvantage) from further processing? c-1. With these new costs and selling prices, what recommendations would you make concerning the company's operations? c-2. If your recommendation in part (c-1) is followed, what would be the company's overall profit