Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 50,000 Rets per year. Costs associated with this level of production and sales are given below:

	Unit			Total
Direct materials	$	25		$	1,250,000
Direct labor		6			300,000
Variable manufacturing overhead		3			150,000
Fixed manufacturing overhead		7			350,000
Variable selling expense		2			100,000
Fixed selling expense		6			300,000
Total cost	$	49		$	2,450,000

The Rets normally sell for $54 each. Fixed manufacturing overhead is constant at $350,000 per year within the range of 44,000 through 50,000 Rets per year.

Required: Please show all work.

2.

Refer to the original data. Assume again that Polaski Company expects to sell only 44,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 6,000 Rets. The Army would pay a fixed fee of $1.60 per Ret, and it would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. Because the army would pick up the Rets with its own trucks, there would be no variable selling expenses associated with this order. If Polaski Company accepts the order, by how much will profits increase or decrease for the year?

3.

Assume the same situation as that described in (2) above, except that the company expects to sell 50,000 Rets through regular channels next year. Thus, accepting the U.S. Armys order would require giving up regular sales of 6,000 Rets. If the Armys order is accepted, by how much will profits increase or decrease from what they would be if the 6,000 Rets were sold through regular channels?