2. Assume the srune situation as that described in requirement 2, except that the company expects to sell 30,000 Rets through regular channels next year. Thus, accepting the U.S. Army's order would require giving up regular sales of 5,000 Rets. If the Army's order is accepted, by how much will profits increase or decrease from what they would be if the 5,000 Rets were sold through regular channels? (Please answer number 2 only)
1. Refer to the original data. Assume again that Polaski Company expects to sell only 25,000 Rets through regular channels next year. The
U.S. Army would like to make a one-time-only purchase of 5,000 Rets. The Army would pay a fixed fee of $1.80 per Ret, and it would
reimburse Polaski Company for all costs of production (variable and fixed) associated with the tmits. 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 Comprany accepts the order, by
how much will profits increase or decrease for the year?
2. Assume the srune situation as that described in requirement 2, except that the company expects to sell 30,000 Rets through regular
channels next year. Thus, accepting the U.S. Army's order would require giving up regular sales of 5,000 Rets. If the Army's order is
accepted, by how much will profits increase or decrease from what they would be if the 5,000 Rets were sold through regular channels?
(Please answer number 2 only)
![PROBLEM 7-22 Accept or Reject a Special Order [LO 7-4]
Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 30,000 Rets
per year. Costs associated with this level of production and sales are given below:
Unit
Total
Direct materials....
$15 $ 450,000
Direct labor. ...
8
240,000
Variable manufacturing overhead...
Fixed manufacturing overhead..
Variable selling expense. .
Fixed selling expense..
Total cost. ...
3
90,000
9
270,000
4
120,000
180,000
$45 $1,350,000
The Rets normally sell for $50 each. Fixed manufacturing overhead is constant at $270,000 per year within the range of 25,000 through
30,000 Rets per year.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F34987530-27ea-4bdc-96e9-37ad3341c5c3%2F7a213f41-dbfa-48a4-b445-547473233d04%2Fs754kw_processed.png&w=3840&q=75)
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