Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 24,000 Rets per year. Costs associated with this level of production and sales are as follows:

UnitTotalDirect materials$16.50$396,000Direct labour9.50228,000Variable manufacturing overhead4.50108,000Fixed manufacturing overhead10.50252,000Variable selling expense4.0096,000Fixed selling expense6.00144,000Total cost$51.00$1,224,000

The Rets normally sell for $56 each. Fixed manufacturing overhead is constant at $252,000 per year within the range of 16,000 through 24,000 Rets per year.

Required:

1.Assume that, due to a recession, Polaski Company expects to sell only 16,000 Rets through regular channels next year. A large retail chain has offered to purchase 8,000 Rets if Polaski is willing to accept a price lower than the regular $56. 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 any time in the future. Determine the maximum discount that Polaski can offer to this large retail chain in order for it to be no worse off compared to its current profit.(Do not round intermediate calculations. Round your percentage answer to nearest whole number.)

2.Refer to the original data. Assume again that Polaski Company expects to sell only 16,000 Rets through regular channels next year. The Canadian Forces would like to make a one-time-only purchase of 8,000 Rets. The Forces would pay a fixed fee of $1.40 per Ret, and in addition would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. Since the Forces would pick up the Rets with its own trucks, there would be no variable selling expenses of any part associated with this order. If Polaski Company accepts this order, by how much will profits be increased or decreased for the year?(Do not round intermediate calculations.)

3.Assume again that Polaski Company expects to sell only 24,000 Rets through regular channels next year.The Canadian Forces would like to make a one-time-only purchase of 8,000 Rets. The Forces would pay a fixed fee of $1.40 per Ret, and in addition would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. Thus, accepting the Canadian Forces' order would require giving up regular sales of 8,000 Rets. Since the Forces would pick up the Rets with its own trucks, there would be no variable selling expenses of any part associated with this order. Compute the minimum fixed fee per unit that Polaski must receive from the Canadian Forces (in addition to the reimbursement of production costs) in order to accept this order.(Do not round intermediate calculations.)