Question #$2$

Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the

company can produce and sell $46,000$ Rets per year. Costs associated with this level of production

and sales are given below:

The Rets normally sell for $$55$ each. Fixed manufacturing overhead is $$414,000$ per year within the

range of $40,000$ through $46,000$ Rets per year.

Required:

Assume due to a recession, Polaski Company expects to sell only $40,000$ Rets through regular

channels next year. A large retail chain offered to purchase $6,000$ 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 $$12,000$ to engrave the retail chain's name on the $6,000$ 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.