# Award: 667 out of 1000 points Polaski Company manufactures...

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Score: 66.01/70 Points 94.30 %
5. Award: 6.67 out of 10.00 points Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 44,000 Rets per year. Costs associated with this level of production and sales are given below: Unit Total Direct materials \$ 15 \$ 660,000 Direct labor 10 440,000 Variable manufacturing overhead 3 132,000 Fixed manufacturing overhead 5 220,000 Variable selling expense 4 176,000 Fixed selling expense 6 264,000 Total cost \$ 43 \$ 1,892,000 The Rets normally sell for \$48 each. Fixed manufacturing overhead is constant at \$220,000 per year within the range of 39,000 through 44,000 Rets per year. Required: 1. Assume that due to a recession, Polaski Company expects to sell only 39,000 Rets through regular channels next year. A large retail chain has offered to purchase 5,000 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 5,000 units. This machine would cost \$10,000. Polaski Company has no assurance that the retail chain will purchase additional units in the future. Determine the impact on profits next year if this special order is accepted.
2. Refer to the original data. Assume again that Polaski Company expects to sell only 39,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 5,000 Rets.