Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 48,000 Rets per year. Costs associated with this level of production and sales are as follows:

Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the companycan produce and sell 48,000 Rets per year. Costs associated with this level of production and sales are asfollows: Unit Total Direct materials $22.50 $1,080,000Direct labour 15.50 744,000Variable manufacturing overhead 10.50 504,000Fixed manufacturing overhead 16.50 792,000Variable selling expense 4.00 192,000Fixed selling expense 6.00 288,000Total cost $75.00 $3,600,000 The Rets normally sell for $80 each. Fixed manufacturing overhead is constant at $792,000 per yearwithin the range of 28,000 through 48,000 Rets per year. 2. Refer to the original data. Assume again that Polaski Company expects to sell only 28,000 Rets throughregular channels next year. The Canadian Forces would like to make a one-time-only purchase of20,000 Rets. The Forces would pay a ?xed fee of $2.90 per Ret, and in addition it would reimbursePolaski Company for all costs of production (variable and ?xed) associated with the units. Since theForces would pick up the Rets with its own trucks, there would be no variable selling expenses of anytype associated with this order. If Polaski Company accepts this order, by how much will pro?ts be increased or decreased for the year? Net increase $ 198,000: