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		8			272,000
Variable manufacturing overhead		3			102,000
Fixed manufacturing overhead		9			306,000
Variable selling expense		2			68,000
Fixed selling expense		6			204,000
Total cost	$	48		$	1,632,000

The Rets normally sell for $53 each. Fixed manufacturing overhead is constant at $306,000 per year within the range of 28,000 through 34,000 Rets per year.

Required:

1. Assume that due to a recession, Polaski Company expects to sell only 28,000 Rets through regular channels next year. A large retail chain has offered to purchase 6,000 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 chains name on the 6,000 units. This machine would cost $12,000. Polaski Company has no assurance that the retail chain will purchase additional units in the future. Determine the impact on profits next year if this special order is accepted.

2 Reter o thear ?na data Assume a a that Aglaski m an expects to sel 0 h 28 0 Res throu n re ular channels next ear l he u s Ar cul 1 llke to make a, one me n purchase t 6 000 Heis lhe Ar v ould ay t ed tec, of 1 20 er Het and rt would reimburse Po ask Company tor all costs or productpon {vanat Ic and fixcd asscc cd th he units. Bccausc the army would p ck up te Rcts wrth its own trucks therc would be no anab c sc ing c pe scs assoc a c? w o dor. If Poas 1 Company acccpts thc o der b ho ch will pro ts Increase or decrease for the year? would pick up tn 00 Rets " the Arm 's or er ?s accepted by haw much g up eguia sales ot 6 3 Assume the se sru ton as that descnte in 2 ab ve, exce t at the com pany expects to sc 13/ 00DF ets through egular Channels next ear Thus accep r g the U SA w proms incrcasc or dccroasc trom what Ihey would bc " 6,000 racts werc sold through roguar channcs? y's order would ure gr