Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell34,000 Rets per year. Costs associated with this level of production and sales are given below:UnitTotalDirect materials$ 15510,000272,000102,000170,00068,000Direct labor8Variable manufacturing overheadFixed manufacturing overheadVariable selling expenseFixed selling expense352.6204,000Total cost$ 39$ 1,326,000The Rets normally sell for $44 each. Fixed manufacturing overhead is $170,000 per year within the range of 28,000 through 34,000Rets per year.Required:1. Assume that due to a recession, Polaski Company expects to sell only 28,000 Rets through regular channels next year. A large retailchain has offered to purchase 6,000 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 6,000 units. This machine would cost $12,000. 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 28,000 Rets through regular channels next year.The U.S. Army would like to make a one-time-only purchase of 6,000 Rets. The Army would pay a fixed fee of $1.40 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 34,000 Rets through regular channelsnext year. Thus, accepting the U.S. Army's order would require giving up regular sales of 6,000 Rets. Given this new information, whatis the financial advantage (disadvantage) of accepting the U.S. Army's special order?1.2.3.

Name: Polaski Company manufactures and sells a single product called a Ret.
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Description: Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell34,000 Rets per year. Costs associated with this level of production and sales are given below:UnitTotalDirect materials$ 15

Fixed costs are the costs that do not change with the change in the level of output. Whereas,…

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Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 34,000 Rets per year. Costs associated with this level of production and sales are given below: Unit Total Direct materials $ 15 $ 510,000 272,000 102,000 170,000 68,000 204,000 Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense 2. 6 Total cost $ 39 $ 1,326,000

Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 34,000 Rets per year. Costs associated with this level of production and sales are given below: Unit Total Direct materials $ 15 $ 510,000 272,000 102,000 170,000 68,000 204,000 Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense 2. 6 Total cost $ 39 $ 1,326,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Variance Analysis

In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.

Standard Costing

The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.

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Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell
34,000 Rets per year. Costs associated with this level of production and sales are given below:
Unit
Total
Direct materials
$ 15
510,000
272,000
102,000
170,000
68,000
Direct labor
8
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling expense
Fixed selling expense
3
5
2.
6
204,000
Total cost
$ 39
$ 1,326,000
The Rets normally sell for $44 each. Fixed manufacturing overhead is $170,000 per year within the range of 28,000 through 34,000
Rets per year.
Required:
1. Assume that due to a recession, Polaski Company expects to sell only 28,000 Rets through regular channels next year. A large retail
chain has offered to purchase 6,000 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 6,000 units. This machine would cost $12,000. 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 28,000 Rets through regular channels next year.
The U.S. Army would like to make a one-time-only purchase of 6,000 Rets. The Army would pay a fixed fee of $1.40 per Ret, and it
would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. 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?
3. Assume the same situation as described in (2) above, except that the company expects to sell 34,000 Rets through regular channels
next year. Thus, accepting the U.S. Army's order would require giving up regular sales of 6,000 Rets. Given this new information, what
is the financial advantage (disadvantage) of accepting the U.S. Army's special order?
1.
2.
3.

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