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Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 38,000 Rets per year.
Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 38,000 Rets per year. Costs associated with this level of production and sales are given below: Direct materials Unit $25 Total $950,000 Direct labor 8 304,000 Variable manufacturing overhead 3 114,000- Fixed manufacturing overhead 7 266,000 Variable selling expense 4 152,000 Fixed selling expense 228,000 Total cost 5:53 $ 2,014,000 The Rets normally sell for $58 each. Fixed manufacturing overhead is $266,000 per year within the range of 30,000 through 38,000 Rets per year. Required: 1. Assume due to a recession, Polaski Company expects to sell only 30,000 Rets through regular channels next year. A large retail chain offered to purchase 8,000 Rets if Polaski will 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 for $16,000 to engrave the retail chain's name on the 8,000 units. Polaski Company has no assurance that the retail chain will purchase additional units in the future. What is the financial advantage (disadvantage) of accepting the special order? Prepare the cash flows from the operating activities section of the statement of cash flows for Myriad Products Company using the indirect method. Note: Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Cash outflows should be indicated with a minus sign. Cash Flows from Operating Activities: Adjustments for noncash effects: : Changes in operating assets and liabilities: Net cash flows from operating activities ($ in millions)
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