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Polaski Company manufactures and sells a single product called a Ret Operating at capscity, 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 manufecturing overnead is $270.000 per year within the range of 25.000 through 30.000 Rets per year. Required: 1. Assume that due to a recession, Polaski Company expects to sell only 25.000 Rets through regular channels next year A large relail chain has offered to purchase 5,000 Rets if Polaski is willing to accept a 16% discount off the reguiar price. There would be no sales commissions on this order, thus, variable selling expenses would be slashed by 75$. 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? 2. Refer to the onginal data. Assume again that Polaskl Company expects to sell only 25,0oo Rets through regular channets 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 unito by the company's absorption costing system, plus it would pay an additional fee of $180 per unit. Because the army would pick up the Rets with its own trucks, there would be no variable selling expenses associated Wht this order. What is the financial advantage (disadvantage) of accepting the US. Army's special order? 3. Assume the same situation as described in (2) above, except that the company expects to sell 30.000 Rets through regular channeis next year. Thus, accepting the US. Armys order would require glving up regular sales of 5.000 Rets. Given this new information, what is the financial advantage (disadvantage) of accepting the US. Army's special order? Polaski Company manufactures and sells a single product called a Ret Operating at capscity, 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 manufecturing overnead is $270.000 per year within the range of 25.000 through 30.000 Rets per year. Required: 1. Assume that due to a recession, Polaski Company expects to sell only 25.000 Rets through regular channels next year A large relail chain has offered to purchase 5,000 Rets if Polaski is willing to accept a 16% discount off the reguiar price. There would be no sales commissions on this order, thus, variable selling expenses would be slashed by 75$. 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? 2. Refer to the onginal data. Assume again that Polaskl Company expects to sell only 25,0oo Rets through regular channets 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 unito by the company's absorption costing system, plus it would pay an additional fee of $180 per unit. Because the army would pick up the Rets with its own trucks, there would be no variable selling expenses associated Wht this order. What is the financial advantage (disadvantage) of accepting the US. Army's special order? 3. Assume the same situation as described in (2) above, except that the company expects to sell 30.000 Rets through regular channeis next year. Thus, accepting the US. Armys order would require glving up regular sales of 5.000 Rets. Given this new information, what is the financial advantage (disadvantage) of accepting the US. Army's special order
