Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 46,000 Rets per year. Costs associated with this level of production and sales are given below: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense Total cost Unit $ 20 3 7 4 6 $ 46 Total $920,000 276,000 138,000 322,000 184,000 276,000 $ 2,116,000 The Rets normally sell for $51 each. Fixed manufacturing overhead is $322,000 per year within the range of 38,000 through 46,000 Rets per year. Required: 1. Assume that due to a recession, Polaski Company expects to sell only 38,000 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 Polaski Company expects to sell only 38,000 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 reimburse Polaski for all of the variable and fixed production costs assigned to the units by the company's absorption costing system, plus it would pay an additional fee of $1.60 per unit. 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?

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Chapter1: Financial Statements And Business Decisions
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Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce
and sell 46,000 Rets per year. Costs associated with this level of production and sales are given below:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling expense
Fixed selling expense
Total cost
Unit
$ 20
6
3
7
4
6
$ 46
Total
$ 920,000
276,000
138,000
322,000
184,000
276,000
$ 2,116,000
The Rets normally sell for $51 each. Fixed manufacturing overhead is $322,000 per year within the range of 38,000 through
46,000 Rets per year.
< Prev
Required:
1. Assume that due to a recession, Polaski Company expects to sell only 38,000 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 Polaski Company expects to sell only 38,000 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 reimburse Polaski for
all of the variable and fixed production costs assigned to the units by the company's absorption costing system, plus it
would pay an additional fee of $1.60 per unit. 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?
7 of 8 ⠀⠀
Next >
Transcribed Image Text:Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 46,000 Rets per year. Costs associated with this level of production and sales are given below: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense Total cost Unit $ 20 6 3 7 4 6 $ 46 Total $ 920,000 276,000 138,000 322,000 184,000 276,000 $ 2,116,000 The Rets normally sell for $51 each. Fixed manufacturing overhead is $322,000 per year within the range of 38,000 through 46,000 Rets per year. < Prev Required: 1. Assume that due to a recession, Polaski Company expects to sell only 38,000 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 Polaski Company expects to sell only 38,000 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 reimburse Polaski for all of the variable and fixed production costs assigned to the units by the company's absorption costing system, plus it would pay an additional fee of $1.60 per unit. 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? 7 of 8 ⠀⠀ Next >
decimal places.)
2. Refer to the original data. Assume again that Polaski Company expects to sell only 38,000 Rets through regular channe
next year. The U.S. Army would like to make a one-time-only purchase of 8,000 Rets. The Army would reimburse Polaski
all of the variable and fixed production costs assigned to the units by the company's absorption costing system, plus it
would pay an additional fee of $1.60 per unit. 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
Army's special order?
3. Assume the same situation as described in (2) above, except that the company expects to sell 46,000 Rets through
regular channels next year. Thus, accepting the U.S. Army's order would require giving up regular sales of 8,000 Rets. Giv-
this new information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order?
1.
2.
3.
< Prev
7 of 8
Next >
Transcribed Image Text:decimal places.) 2. Refer to the original data. Assume again that Polaski Company expects to sell only 38,000 Rets through regular channe next year. The U.S. Army would like to make a one-time-only purchase of 8,000 Rets. The Army would reimburse Polaski all of the variable and fixed production costs assigned to the units by the company's absorption costing system, plus it would pay an additional fee of $1.60 per unit. 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 Army's special order? 3. Assume the same situation as described in (2) above, except that the company expects to sell 46,000 Rets through regular channels next year. Thus, accepting the U.S. Army's order would require giving up regular sales of 8,000 Rets. Giv- this new information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order? 1. 2. 3. < Prev 7 of 8 Next >
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