Problem $9-5$ Determining Whether to Accept or Reject a Special Order $($LO$1-$ CC$5)($Algo$)$

Psaki Inc. manufactures and sells a single product called a Shiner. Operating at capacity, the company can produce and sell $58,000$ Shiners per year. Costs associated with this level of production and sales are as follows:

$6$ points

$6$ points

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The Shiners normally sell for $$90$ each. Fixed manufacturing overhead is constant at $$1,102,000$ per year within the range of $33,000$ through $58,000$ Shiners per year.

Required:

Assume that, due to a recession, Psaki Company expects to sell only $33,000$ Shiners through regular channels next year. A large retail chain has offered to purchase $25,000$ Shiners if Psaki is willing to accept a price lower than the regular $$90.$ There would be no sales commissions on this order; thus, variable selling expenses would be slashed by $75\%.$ However, Psaki Company would have to purchase a special machine to engrave the retail chain's name on the $25,000$ units. This machine would cost $$50,000.$ Psaki Company has no assurance that the retail chain will purchase additional units anytime in the future. Determine the maximum discount that Psaki 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.$)$

Maximum discount

$\%$

Refer to the original data. Assume again that Psaki Company expects to sell only $33,000$ Shiners through regular channels next year. The Canadian Forces would like to make a one$-$time$-$only purchase of $25,000$ Shiners. The Forces would pay a fixed fee of $$3\mathrm{.}50$ per Shiner, and in addition would reimburse Psaki Company for all costs of production $($varlable and fixed$)$ associated with the units. Since the Forces would pick up the Shiners with its own trucks, there would be no variable selling expenses of any type associated with this order. If Psaki Company accepts this order, by how much will profits be increased or decreased for the year? $($Do not round intermediate calculations.$)$

n profits

Assume the same situation as in Requirement $(2),$ except that the company expects to sell $58,000$ Shiners through regular channels next year. Thus, accepting the Canadian Forces' order would require giving up regular sales of $25,000$ Shiners. Compute the minimum fixed fee per unit that Psaki 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.$)$

Minimum fixed fee per unit in addition to the reimbursement of production cost