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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 $ 25 Total $ 1,200,000 288,000 144,000 336,000 192,000 Direct materials Direct labor 6. Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense 3 7 4 6 288,000 Total cost $ 51 $ 2,448,000 The Rets normally sell for $56 each. Fixed manufacturing overhead is $336,000 per year within the range of 41,000 through 48,00O 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 $ 25 Total $ 1,200,000 288,000 144,000 336,000 192,000 Direct materials Direct labor 6. Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense 3 7 4 6 288,000 Total cost $ 51 $ 2,448,000 The Rets normally sell for $56 each. Fixed manufacturing overhead is $336,000 per year within the range of 41,000 through 48,00O Rets per year.

FINANCIAL ACCOUNTING
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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I only need an answer to question 1, had previously asked this question and the answer I was given is incorrect, see attachment 

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 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense 3 7 4 Total cost $ 51 $ 2,448,000 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.
Transcribed Image Text: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 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense 3 7 4 Total cost $ 51 $ 2,448,000 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.
Required: 1. Assume that due to a recession, Polaski Company expects to sell only 41,000 Rets through regular channels next year. A large retail chain has offered to purchase 7,000 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 7,000 units. This machine would cost $14,000. 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 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 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 48,000 Rets through regular channels next year. Thus, accepting the U.S. Army's order would require giving up regular sales of 7,000 Rets. Given this new information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order? X Answer is complete but not entirely correct. 1. Financial advantage $ 49,280
Transcribed Image Text:Required: 1. Assume that due to a recession, Polaski Company expects to sell only 41,000 Rets through regular channels next year. A large retail chain has offered to purchase 7,000 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 7,000 units. This machine would cost $14,000. 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 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 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 48,000 Rets through regular channels next year. Thus, accepting the U.S. Army's order would require giving up regular sales of 7,000 Rets. Given this new information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order? X Answer is complete but not entirely correct. 1. Financial advantage $ 49,280
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