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:

	Unit	Total
Direct materials	$15	$450,000
Direct labor	8	240,000
Variable manufacturing overhead	3	90,000
Fixed manufacturing overhead	9	270,000
Variable selling expense	4	120,000
Fixed selling expense	6	180,000
Total cost	$45	$1,350,000

The Rets normally sell for $50 each. Fixed manufacturing overhead is constant at $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 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