Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 34,000 Rets per year. Costs associated with this level of production and sales are given below:

	Unit	Total
Direct materials	$ 20	$ 680,000
Direct labor	6	204,000
Variable manufacturing overhead	3	102,000
Fixed manufacturing overhead	7	238,000
Variable selling expense	4	136,000
Fixed selling expense	6	204,000
Total cost	$ 46	$ 1,564,000

The Rets normally sell for $51 each. Fixed manufacturing overhead is $238,000 per year within the range of 28,000 through 34,000 Rets per year.

Required:

2 A: Refer to the original data. Assume again that Polaski Company expects to sell only 28,000 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 reimburse Polaski for all of the variable and fixed production costs assigned to the units by the companys absorption costing system, plus it would pay an additional fee of $1.20 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 B :Assume the same situation as described in (2) above, except that the company expects to sell 34,000 Rets through regular channels next year. Thus, accepting the U.S. Armys order would require giving up regular sales of 6,000 Rets. Given this new information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order?