Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell48,000 Rets per year. Costs associated with this level of production and sales are given below:UnitTotal$ 1,200,000288,000144,000336,000192,000288,000$ 2,448,000Direct materials$ 25Direct laborVariable manufacturing overheadFixed manufacturing overheadVariable selling expenseFixed selling expense374Total cost$ 51The Rets normally sell for $56 each. Fixed manufacturing overhead is $336,000 per year within the range of 41,000 through 48,000Rets per year. Required:1. Assume that due to a recession, Polaski Company expects to sell only 41,000 Rets through regular channels next year. A large retailchain has offered to purchase 7,000 Rets if Polaski is willing to accept a 16% discount off the regular price. 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 7,000 units. This machine would cost $14,000. Polaski Companyhas no assurance that the retail chain will purchase additional units in the future. What is the financial advantage (disadvantage) ofaccepting 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 41,000 Rets through regular channels next year.The U.S. Army would like to make a one-time-only purchase of 7,000 Rets. The Army would pay a fixed fee of $1.80 per Ret, and itwould reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. Because the army wouldpick up the Rets with its own trucks, there would be no variable selling expenses associated with this order. What is the financialadvantage (disadvantage) of accepting the U.S. Army's special order?3. Assume the same situation as described in (2) above, except that the company expects to sell 48,000 Rets through regular channelsnext year. Thus, accepting the U.S. Army's order would require giving up regular sales of 7,000 Rets. Given this new information, whatis the financial advantage (disadvantage) of accepting the U.S. Army's special order?

Given information : Capacity to sell and produce = 48,000 Rets Selling price = $56 Fixed…

Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 48,000 Rets per year. Costs associated with this level of production and sales are given below: Unit Total $ 25 $ 1,200,000 288,000 144,000 336,000 192,000 288,000 $ 2,448,000 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense 6. 7 4. Total cost $ 51 The Rets normally sell for $56 each. Fixed manufacturing overhead is $336,000 per year within the range of 41,000 through 48,000 Rets per year.

Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 48,000 Rets per year. Costs associated with this level of production and sales are given below: Unit Total $ 25 $ 1,200,000 288,000 144,000 336,000 192,000 288,000 $ 2,448,000 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense 6. 7 4. Total cost $ 51 The Rets normally sell for $56 each. Fixed manufacturing overhead is $336,000 per year within the range of 41,000 through 48,000 Rets per year.

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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