Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 56,000 Rets per year. Costs associated with this level of production and sales are as follows:

Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 56,000 Rets per year. Costs associated with this level of production and sales are as follows Total $24.50 $1,372,000 980,000 700,000 Fixed manufacturing overhead 18.50 1,036,000 224 000 336,000 Direct materials Direct labour Variable manufacturing overhead 17.50 12.50 Variable selling expense Fixed selling expense 4.00 6.00 Total cost $83.00 $4648,000 The Rets normally sell for $88 each. Fixed manufacturing overhead is constant at $1,036,000 per year within the range of 32,000 through 56,000 Rets per year Required: 1. Assume that, due to a recession, Polaski Company expects to sell only 32,000 Rets through regular channels next year. A large retail chain has offered to purchase 24 ,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 24,000 units. This machine would cost $48,000. Polaski Company has no assurance that the retail chain will purchase additional units any time in the future. Determine the impact on profits next year if this special order is accepted in profits 2. Refer to the original data. Assume again that Polaski Company expects to sell only 32,000 Rets through regular channels next year. The Canadian Forces would like to make a one-time-only purchase of 24,000 Rets. The Forces would pay a fixed fee of $3.40 per Ret, and in addition it would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. Since the Forces would pick up the Rets with its own trucks, there would be no variable selling expenses of any type associated with this order. If Polaski Company accepts this order, by how much will profits be increased or decreased for the year? in profits