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Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 32,000 Rets per year. Costs

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Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 32,000 Rets per year. Costs associated with this level of production and sales are given below: Unit Total Direct materials 20 640,000 Direct labor 192,000 Variable manufacturing overhead 96,000 Fixed manufacturing overhead 288,000 Variable selling expense 128,000 Fixed selling expense 192,000 Total cost 48 1,536,000 The Rets normally sell for $53 each. Fixed manufacturing overhead is constant at $288,000 per year within the range of 26,000 through 32,000 Rets per year. Required: 1. Assume that due to a recession, Polaski Company expects to sell only 26,000 Rets through regular channels next year. A large retail chain has offered to purchase 6,000 Rets if Polaski is willing to accept a 16% 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 6,000 units. would cost $12,000. Polaski Company has no assurance that the retail chain will purchase additional units in the future. Determine the impact on profits next year ifthis special order is accepted. Net profit

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