Polaski Company manufactures and sells a single product called a Ret Operating at capacity, the company can produce and sell 34,000 Rets per year. Costs associated with this level of production and sales are given below: Unit Total Direct materials $ 680,000 Direct labor 272.000 Variable manufacturing overhead 102.000 Fixed manufacturing overhead 170,000 Variable selling expense 68,000 Fixed selling expense 284,900 Total cost $ 1,496,000 $ 20 3 5 2. 6 $ 44 The Rets normally sell for $49 each. Fixed manufacturing overhead is $170,000 per year within the range of 26,000 through 34.000 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 8,000 Rets if Poloski is willing to accept a 16% discount of the regular price. There would be no sales commissions on this order; thus, variable selling expenses would be sloshed by 75%. However, Polask 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 Poloski 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 dota. Assume again that Poloski Company expects to sell only 26,000 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 $1.60 per Ret, and it would reimburse Poloski 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. What is the financial advantage disadvantage) of accepting the US Army's special order? 3. Assume the same situation as described in (2) above, except that the company expects to sell 34.000 Rets through regular channels next year. Thus, accepting the US 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 U.S. Army's special order? 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 8,000 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 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 Poloski Company expects to sell only 26,000 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 $160 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. 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 34,000 Rets through regular channels next year. Thus, accepting the US 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 U.S. Army's special order? 1 2 3
