Refer to the original data assume again that polaski

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2. Refer to the original data. Assume again that Polaski Company expects to sell only 40,000 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 $1.80 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. If Polaski
Company accepts the order, by how much will profits increase or decrease for the year?
3. Assume the same situation as that 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 6,000 Rets. If the Army’s order is accepted, by how much will profits increase or decrease from what they would be if the 6,000 Rets were sold through regular channels?
References Worksheet Problem 12-22 Accept or Reject a Special Order [LO12-4] Learning Objective: 12-04 Prepare an analysis showing whether a special order should be accepted. Problem 12-22 Accept or Reject a Special Order [LO12-4] Problem 12-22 Accept or Reject a Special Order [LO12-4] 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: Unit Total Direct materials $ 20 $ 920,000 Direct labor 6 276,000 Variable manufacturing overhead 3 138,000 Fixed manufacturing overhead 9 414,000 Variable selling expense 2 92,000 Fixed selling expense 6 276,000 Total cost $ 46 $ 2,116,000 The Rets normally sell for $51 each. Fixed manufacturing overhead is constant at $414,000 per year within the range of 40,000 through 46,000 Rets per year.

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