Polaski Company manufactures and sells a single product called a Ret Operating at capacity, the company can produce and sell 32,000 Rets per year. Costs associated with this level of production and sales are given below. Unit $ 15 6 3 5 4 6 $ 39 Direct materials Direct labor Variable manufacturing overhead Pixed manufacturing overhead Variable selling expense Pixed selling expense Total cost Total $ 480,000 192,000 96,000 160,000 128,000 192,000 $ 1,240,000 ok ht oces The Rets normally sell for $44 each. Fixed manufacturing overhead is $160,000 per year within the range of 24,000 through 32,000 Rets per year Required: 1. Assume that due to a recession, Polaskl Company expects to sell only 24,000 Rets through regular channels next year. A large retail chain has offered to purchase 8,000 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 8,000 units. This machine would cost $16,000. Polaski Company has no assurance that the retail chain will purchase additional units in the future. What is the financial advantage (disadvantage) of accepting the special order? (Round your intermediate calculations to 2 decimal places.) + Required: 1. Assume that due to a recession, Polask Company expects to sell only 24,000 Rets through regular channels next year. A large retail chain has offered to purchase 8,000 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 8.000 units. This machine would cost $16,000. Polask Company has no assurance that the retail chain will purchase additional units in the future. What is the financial advantage (disadvantage) of accepting the special order? (Round your intermediate calculations to 2 decimal places.) 2. Refer to the original data. Assume again that Poloski Company expects to sell only 24,000 Rets through regular channels next year. The U.S. Army would like to make a one-time only purchase of 8,000 Rets. The Army would pay a fixed fee of $1.20 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. What is the financial advantage (disadvantage of accepting the U.S. Army's special order? 3. Assume the same situation as described in (2) above, except that the company expects to sell 32,000 Rets through regular channels next year. Thus, accepting the US Army's order would require aiping up regutor sales of 8,000 Rets. Given this new information, what is the financial advantage (disadvantage) of accepting the U.S. Ariny's special order? 1. Financial advantage 2. Financial advantage 3. Financial (disadvantage)
