Polaski Company manufactures and sells a single product called a Ret. Operating atcapacity, the company can produce and sell 32,000 Rets per year. Costs associated withthis level of production and sales are given below:UnitTotal25Direct materials$800,000Direct laborVariable manufacturing overheadFixed manufacturing overheadVariable selling expenseFixed selling expense192,00096,000224,00064,000192,000491,568,000Total costThe Rets normally sell for $54 each. Fixed manufacturing overhead is constant at$224,000 per year within the range of 26,000 through 32,000 Rets per year.O M 7N O24 2. Refer to the original data. Assume again that Polaski Company expects to sell only26,000 Rets through regular channels next year. The U.S. Army would like to make aone-time-only purchase of 6,000 Rets. The Army would pay a fixed fee of $1.40 perRet, and it would reimburse Polaski Company for all costs of production (variable andfixed) associated with the units. Because the army would pick up the Rets with its owntrucks, there would be no variable selling expenses associated with this order. IfPolaski Company accepts the order, by how much will profits increase or decrease forthe year?Net profitby

Special order:The order received from special customers (except regular customers) at special price…

Answered: Polaski Company manufactures and sells…

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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....... Decision on Accepting Additional Business Miramar Tire and Rubber Company has capacity to produce 196,000 tires. Miramar presently produces and sells 150,000 tires for the North American market at a price of $95.00 per tire. Miramar is evaluating a special order from a South American automobile company, Rio Motors. Rio Motors is offering to buy 23,000 tires for $75.75 per tire. Miramar's accounting system indicates that the total cost per tire is as follows: Direct materials Direct labor Factory overhead (60% variable) $36 13 22 Selling and administrative expenses (30% variable) 19 $90 < Total Miramar pays a sales commission equal to 5% of the selling price on North American orders, which is included in the variable portion of the selling and administrative expenses. However, this special order would not have a sales commission. If the order was accepted, the tires would be shipped overseas for an additional shipping cost of $5.00 per tire. In addition, Rio has made the order…
Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 58,000 Rets per year. Costs associated with this level of production and sales are as follows: Unit Direct materials Direct labour $25.00 18.00 13.00 Total $1,450,000 1,044,000 754,000 1,102,000 19.00 Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense 4.00 232,000 348,000 6.00 Total cost $ 85.00 $4,930,000 The Rets normally sell for $90 each. Fixed manufacturing overhead is constant at $1,102,000 per year within the range of 33,000 through 58,000 Rets per year. Required: 1. Assume that, due to a recession, Polaski Company expects to sell only 33,000 Rets through regular channels next year. A large retail chain has offered to purchase 25,000 Rets if Polaski is willing to accept a price lower than the regular $90. There would be no sales commissions on this order; thus, variable selling expenses would be…
Leo Consulting enters into a contract with Highgate University to restructure Highgate’s processes for purchasing goods from suppliers. The contract states that Leo will earn a fixed fee of $66,000 and earn an additional $13,000 if Highgate achieves $130,000 of cost savings. Leo estimates a 70% chance that Highgate will achieve $130,000 of cost savings. Assuming that Leo determines the transaction price as the expected value of expected consideration, what transaction price will Leo estimate for this contract? Transaction price for the contract ?
RG Motors has been approached by a new customer with an offer to purchase 5,000 units of its hand-free, Wi-Fi-enabled automotive model – the SMART, at a price of RM18,000 per automobile. RG’s other sales would not be affected by this new customer offer. RG normally produces 100,000 units of its SMART model per year but only plans to produce and sell 90,000 units in the coming year. The normal sales price is RM35,000 per SMART. Unit cost information for the normal level of activity is as follows: Table 7: Production Costs Total Cost RM Direct materials 10,000 Direct labor 2,000 Variable overhead 4,000 Fixed overhead 8,000 Total 24,000 Fixed overhead will not be affected by whether or not the special order is accepted. Required: (i) List the relevant costs and benefits of the two alternatives of the special order. (ii) Propose whether operating income increase or decrease if the order is accepted with calculation details.
Miles Co. can further process Product B to produce Product C. Product B is currently selling for P60 per pound and costs P42 per pound to produce. Product C would sell for P82 per pound and would require an additional cost of P13 per pound to produce. What is the differential revenue of producing and selling Product C? (Per pound)
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Sheridan Company incurs a cost of $36 per unit, of which $20 is variable, to make a product that normally sells for $57. A foreign wholesaler offers to buy 7,000 units at $30 each. Sheridan will incur additional costs of $2 per unit to imprint a logo and to pay for shipping. Compute the increase or decrease in net income Sheridan will realize by accepting the special order, assuming Sheridan has sufficient excess operating capacity. (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45)) Revenues Costs Net income $ $ Reject Sheridan company should LA $ LA Should Sheridan Company accept the special order? ✓the special order. Accept $ LA LA $ Net Income Increase (Decrease) A SUPP
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Bonita Company manufactures a product with a unit variable cost of $43 and a unit sales price of $75. Fixed manufacturing costs were $79500 when 7950 units were produced and sold, equating to $10 per unit. The company has a one-time opportunity to sell an additional 1000 units at $54 each in an international market, which would notaffect its present sales. The company has sufficient capacity to produce the additional units. How much is the relevant income effect of accepting the special order? $43000 $1000 $11000 $7950
Bramble Company manufactures a product with a unit variable cost of $41 and a unit sales price of $75. Fixed manufacturing costs were $79800 when 7980 units were produced and sold, equating to $10 per unit. The company has a one-time opportunity to sell an additional 1000 units at $54 each in an international market, which would not affect its present sales. The company has sufficient capacity to produce the additional units. How much is the relevant income effect of accepting the special order? $13000 $41000 $3000 $23940
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Amarjit Truckers, Ltd. operates a fleet of delivery trucks in North America. The company has determined that, if a truck is driven 120,000 kilometres during a year, the average operating cost is 18.000 cents per kilometre. If a truck is driven only 50,000 kilometres during a year, the average operating cost increases to 21.0 cents per kilometre. Required: 1. Using the high - low method, estimate the variable and fixed cost elements of the annual cost of truck operation. (Do not round intermediate calculations. Round the "Variable cost" to 5 decimal places. Round "Fixed cost" to 2 decimal places.) 2. Express the variable and fixed costs in the form Y = a + bX. (Do not round intermediate calculations. Round the "Variable cost" to 5 decimal places. Round "Fixed cost" to 2 decimal places.) 3. If a truck were driven 80,000 kilometres during a year, what total cost would you expect to be incurred? (Do not round intermediate calculations. Round "Total annual cost" to 2 decimal places.)

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