Polaski Company manufactures and sells a single product called a Ret Operating at capacity, the company can produce and sell 36.000 Rets per year. Costs associated with this level of production and sales are given below: Unit $ 25 Direct materials Direct labor variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense Total cost 3 7 4 6 Total $ 9ee, eee 288,000 188, eee 252, eee 144,000 216,080 $ 1,908,000 $ 53 The Rets normally sell for $58 each. Fixed manufacturing overhead is $252,000 per year within the range of 28,000 through 36,000 Rets per year. Required: 1. Assume that due to a recession, Polaski Company expects to sell only 28.000 Rets through regular channels next year . A large retail chain has offered to purchase 8.000 Rets of 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.) 2. Refer to the original data. Assume again that Polaski Company expects to sell only 28,000 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 $1.40 per Ret, and it would reimburse Polaski Company for all costs of production (vartable 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 36,000 Rets through regular channels next year. Thus, accepting the U.S. Army's order would require giving up regular sales of 8,000 Rets. Given this new Information, what is the financial advantage (disadvantage) of accepting the US Army's special order? 1 2 3. The North Store has consistently shown losses over the past two years. For this reason, management is giving consideration to closing the store. The company has asked you to make a recommendation as to whether the store should be closed or kept open. The following additional Information is available for your use: a. The breakdown of the selling and administrative expenses that are shown above is as follows: Total North Store South store East Store Selling expenses Sales salaries Direct advertising General advertising Store rent Depreciation of store fixtures Delivery salaries Depreciation of delivery equipment Total selling expenses $227,200 $ 65,500 $ 81,600 $ 79,900 182,000 54, eee 75, eee 53,000 49,500 11,400 19,880 18,300 315,00 88,000 123,000 104,800 17,50 4,900 6,3ee 6,30 21,900 7,30 7,300 7,380 3,300 3,300 5823,000 $ 234,400 $316,5ee $272,100 "Allocated on the basis of sales dollars. Total North Store South Store East store Administrative expenses: Store managers' salaries General office salaries Insurance on fixtures and inventory utilities Employment taxes General office-other Total administrative expenses $ 74,500 49,500 28,eee 107,535 55,965 82,50 5398,00 $ 22,500 $ 31,500 $20,5ee 11,400 19,800 18,300 10,500 9,100 31,695 39,540 36,3 16,ees 21,860 18,90 19,000 3,500 $109, eee $155,400 $133, see "Allocated on the basis of sales dollars. b. The lease on the building housing the North Store can be broken with no penalty c. The fixtures being used in the North Store would be transferred to the other two stores if the North Store were closed. d. The general manager of the North Store would be retained and transferred to another position in the company If the North Store were closed. She would be filling a position that would otherwise be filled by hiring a new employee at a salary of $10.400 per quarter. The general manager of the North Store would continue to earn her normal salary of $11.400 per quarter. All other managers and employees in the North store would be discharged. e. The company has one delivery crew that serves all three stores. One delivery person could be discharged if the North Store were closed. This person's salary is $4,300 per quarter. The delivery equipment would be distributed to the other stores. The equipment does not wear out through use, but does eventually become obsolete. 1. The company pays employment taxes equal to 15% of their employees' salaries. 9. One-third of the insurance in the North Store is on the store's fixtures. h. The "General office salaries and General office-other relate to the overall management of Superior Markets, Inc. If the North Store were closed, one person in the general office could be discharged because of the decrease in overall workload. This person's compensation is $5,700 per quarter. Required: 1. How much employee salaries will the company avoid if it closes the North Store? 2. How much employment taxes will the company avoid if it closes the North Store? 3. What is the financial advantage (disadvantage) of closing the North Store? 4. Assuming that the North Store's floor space can't be subleased, would you recommend closing the North Store? 5. Assume that the North Store's floor space can't be subleased. However, let's Introduce three more assumptions. First assume that if the North Store were closed, one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to Superior Markets. Second, assume that the East Store has enough capacity to handle the increased sales that would arise from closing the North Store. Third, assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as present sales in the East store. Given these new assumptions, what is the financial advantage (disadvantage) of closing the North Store? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 How much employee salaries will the company avoid if it closes the North Store? Employee salaries Required 2 > Required 1 Required 2 Required 3 Required 4 Required 5 How much employment taxes will the company avoid if it doses the North Store? Employment taxes Required 1 Required 2 Required 3 Required 4 Required 5 What is the financial advantage (disadvantage) of closing the North Store? (Enter any "disadva Financial advantage (disadvantage) Required 1 Required 2 Required 3 Required 4 Required 5 Assume that the North Store's floor space can't be subleased. However, let's introduce three more assumptions. First, assume that if the North Store were closed, one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to Superior Markets. Second, assume that the East Store has enough capacity to handle the increased sales that would arise from closing the North Store. Third, assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as present sales in the East store. Given these new assumptions, what is the financial advantage (disadvantage) of closing the North Store? (Enter any disadvantages" as a negative value.) Show less Financial advantage (disadvantage)