Polaski Company manufactures and sells a single product called a Ret operating the company can produce and sell Rets per year. Costs associated with this level of production and sales are given below. Unit Total Direct materials 25 1,050,000 Direct labor 420,000 Variable manufacturing overhead 126,000 Fixed manufacturing overhead 378,000 Variable selling expense 84,000 Fixed selling expense 252,000 Total cost 55 2,310,000 The Rets normally sell for $60 each Fixed manufacturing overhead is constant at $378,000 per year within the range of 35.000 through 42.000 Rets per year. Required: 1. Assume that due to a recession, Polaski Company expects to sell only 35,000 Rets through regular channels next year A large retail chain has offered to purchase 7,000 Rets if 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 7,000 units. This machine would cost $14,000. Polaski Company has no assurance that the retail chain will purchase additional units in the future. Determine the impact on profits next year if this special order is accepted 2. Refer to the original data. Assume again that Polaski Company expects to sell only 35,000 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 pay a fixed fee of $2.00 per Ret, and it would reimburse Polaski Company for all costs of production (variable 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 If Polaski Company accepts the order, by how much will profits increase or decrease for the year