Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell40,000 Rets per year. Costs associated with this level of production and sales are as follows:UnitTotalDirect materials$20.502$820,000540,000340,000580,000160,000240,000Direct labour13.50Variable manufacturing overheadFixed manufacturing overheadVariable selling expenseFixed selling expense8.5014.504. ০06.00Total cost$67.00$2,680,000The Rets normally sell for $72 each. Fixed manufacturing overhead is constant at $580,000 per year within the range of 24,000through 40,000 Rets per year.Required:1. Assume that, due to a recession, Polaski Company expects to sell only 24,000 Rets through regular channels next year. A large retailchain has offered to purchase 16,000 Rets if Polaski is willing to accept a price lower than the regular $72. There would be no salescommissions on this order; thus, variable selling expenses would be slashed by 75%. However, Polaski Company would have topurchase a special machine to engrave the retail chain's name on the 16,000 units. This machine would cost $32,000. PolaskiCompany has no assurance that the retail chain will purchase additional units any time in the future. Determine the maximum discountthat Polaski can offer to this large retail chain in order for it to be no worse off compared to its current profit. (Do not roundintermediate calculations. Round your percentage answer to nearest whole number.)Maximum discount

Total cost of 40000 units =2680000 For 16000 units additional cost required are $32000 Now Fixed…

ally sell for $72 each. Fixed manufacturing overhead is constant at $580,000 per year within the Rets per year. due to a recession, Polaski Company expects to sell only 24,000 Rets through regular channels ed to purchase 16,000 Rets if Polaski is willing to accept a price lower than the regular $72. There n this order; thus, variable selling expenses would be slashed by 75%. However, Polaski Compan cial machine to engrave the retail chain's name on the 16,000 units. This machine would cost $3. 1o assurance that the retail chain will purchase additional units any time in the future. Determine n offer to this large retail chain in order for it to be no worse off compared to its current profit. (Da alculations. Round your percentage answer to nearest whole number.) nt

ally sell for $72 each. Fixed manufacturing overhead is constant at $580,000 per year within the Rets per year. due to a recession, Polaski Company expects to sell only 24,000 Rets through regular channels ed to purchase 16,000 Rets if Polaski is willing to accept a price lower than the regular $72. There n this order; thus, variable selling expenses would be slashed by 75%. However, Polaski Compan cial machine to engrave the retail chain's name on the 16,000 units. This machine would cost $3. 1o assurance that the retail chain will purchase additional units any time in the future. Determine n offer to this large retail chain in order for it to be no worse off compared to its current profit. (Da alculations. Round your percentage answer to nearest whole number.) nt

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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