Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 32,000 Rets per year. Costs associated with this level of production and sales are as follows: Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead variable selling expense Fixed selling expense Total cost Unit $18.50 11.50 6.50 12.50 +4.00 6.00 $59.00 Maxamum discount Total $ 592,008 The Rets normally sell for $64 each. Fixed manufacturing overhead is constant at $400,000 per year within the range of 20,000 through 32.000 Rets per year. % 369,008 208,038 430,000 128,000 192,008 $1,668,000 Required: 1. Assume that due to a recession, Polaski Company expects to sell only 20.000 Rets through regular channels next year. A large retail chain has offered to purchase 12,000 Rets if Polaski is willing to accept a price lower than the regular $64. 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 12.000 units. This machine would cost $24,000. Palaski Company has no assurance that the retail chain will purchase additional units any time in the future Determine the maximum discount that Polaski 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.)

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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2. Refer to the original data. Assume again that Polaski Company expects to sell only 20,000 Rets through regular channels next year. The
Canadian Forces would like to make & one-time-only purchase of 12,000 Rets. The Forces would pay a fixed fee of $2.00 per Ret, and in
addition would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. Since the Forces would
plex up the Rets with its own trucks, there would be no variable selling expenses of sny type associated with this order. If Polaski Company
accepts this order, by how much will profits be increased or decreased for the year? Do not round Intermed late calculations.)
Net increase
in prots
3. Assume again that Poleski Company expects to sell only 32.000 Rets through regular charnels next year. The Canadian Forces would like
to make a one time only purchase of 12.000 Pass The Forces would pay à fixed fee of $2,00 per Fel, and in acciation would reimburse Pœląski
Company for all costs of production (variable and fixed) associated with the units. Thus, accepting the Canadian Forces order would require
giving up regular sales of 12.000 Pets. Since the Forces would pick up the Rets with its own trucks, there would be no variable se ling
expenses of any ly associated with this order Compute the minimum fixed fee per unit that Fodškimust receive from the Canadian Forces
in addition to the reimbursement of production costs) in order to accept this order (Do not round Intermediate calculations.|
Monum fixed fee per unt in addition to the remboursement of production cost
1
40
Transcribed Image Text:2. Refer to the original data. Assume again that Polaski Company expects to sell only 20,000 Rets through regular channels next year. The Canadian Forces would like to make & one-time-only purchase of 12,000 Rets. The Forces would pay a fixed fee of $2.00 per Ret, and in addition would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. Since the Forces would plex up the Rets with its own trucks, there would be no variable selling expenses of sny type associated with this order. If Polaski Company accepts this order, by how much will profits be increased or decreased for the year? Do not round Intermed late calculations.) Net increase in prots 3. Assume again that Poleski Company expects to sell only 32.000 Rets through regular charnels next year. The Canadian Forces would like to make a one time only purchase of 12.000 Pass The Forces would pay à fixed fee of $2,00 per Fel, and in acciation would reimburse Pœląski Company for all costs of production (variable and fixed) associated with the units. Thus, accepting the Canadian Forces order would require giving up regular sales of 12.000 Pets. Since the Forces would pick up the Rets with its own trucks, there would be no variable se ling expenses of any ly associated with this order Compute the minimum fixed fee per unit that Fodškimust receive from the Canadian Forces in addition to the reimbursement of production costs) in order to accept this order (Do not round Intermediate calculations.| Monum fixed fee per unt in addition to the remboursement of production cost 1 40
Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 32,000 Pers
per year. Costs assodated with this level of production and sales are as follows:
Direct materials
Direct labour
Variable manufacturing overhead
Fixed manufacturing overhead
variable selling expense
Fixed selling expense
Total cost
Unit
Total
$18.50 $ 592,008
369,008
6.50
%
6.00
$59.00
128,000
192,038
The Rets normally sell for $64 each. Fixed manufacturing overhead is constant at $400,000 per year within the range of 20,000 through
32.000 Rets per year.
Required:
1. Assume that, due to a recession, Polaski Company expects to sell only 20,000 Rets through regular channels next year. A large retail chain
has offered to purchase 12.000 Fets if Polaski is willing to accept a price lower than the regular $64 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 retall chain's name on the 12.000 units. This machine would cost $24.000. Polaski Company has no assurance that the retail
chain will purchase additional units any time in the future Determine the maximum discount that Polaski 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.)
Transcribed Image Text:Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 32,000 Pers per year. Costs assodated with this level of production and sales are as follows: Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead variable selling expense Fixed selling expense Total cost Unit Total $18.50 $ 592,008 369,008 6.50 % 6.00 $59.00 128,000 192,038 The Rets normally sell for $64 each. Fixed manufacturing overhead is constant at $400,000 per year within the range of 20,000 through 32.000 Rets per year. Required: 1. Assume that, due to a recession, Polaski Company expects to sell only 20,000 Rets through regular channels next year. A large retail chain has offered to purchase 12.000 Fets if Polaski is willing to accept a price lower than the regular $64 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 retall chain's name on the 12.000 units. This machine would cost $24.000. Polaski Company has no assurance that the retail chain will purchase additional units any time in the future Determine the maximum discount that Polaski 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.)
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