Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 3 4 , 0 0

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:
The Rets normally sell for $44 each. Fixed manufacturing overhead is $170,000 per year within the range of 27,000 through 34,000
Rets per year.
Required:
Assume due to a recession, Polaski Company expects to sell only 27,000 Rets through regular channels next year. A large retail
chain offered to purchase 7,000 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 $14,000 to engrave the retail chain's name on the 7,000 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?
Note: Round your intermediate calculations to 2 decimal places.
Refer to the original data. Assume Polaski Company expects to sell 27,000 Rets through regular channels next year. The U.S. Army
would like to make a one-time-only purchase of 7,000 Rets. The Army would reimburse Polaski for all of the variable and fixed
production costs assigned to the units by the company's absorption costing system, plus it would pay an additional fee of $1.60 per
unit. 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?
Assume the same situation as described in (2) above, except the company expects to sell 34,000 Rets through regular channels
next year. Thus, accepting the U.S. Army's order would require giving up regular sales of 7,000 Rets. Given this new information,
what is the financial advantage (disadvantage) of accepting the U.S. Army's special order?
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Fundamentals For Health Care Management

Authors: Steven A. Finkler, David M. Ward, Thad Calabrese

3rd Edition

1284124932, 9781284124934

More Books

Students also viewed these Accounting questions