ACCOUNTING 0 homework Question 3 (of5) value: 20.00 points Polaski Company manuf

Question

ACCOUNTING 0 homework Question 3 (of5) value: 20.00 points Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 42,000 Rets per year Costs associated with this level of production and sales are given below: Unit Total Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense $25 $1,050,000 420,000 126,000 294,000 84,000 252,000 10 Total cost $53 2,226,000 The Rets normaly sell or e ac Fixed manufacturing overthead is conan t $234.00 or year wthin Required: 1. Assume that due to a recession, Polaski Company expects to sell only 35.000 Rets through regular channels next year. A large retail chain has offered to purchase 7,000 Rets if Polaski is a 16% discount off the regular price. There would be no sales commissions seling expenses would be slashed by-75%. However, Poli ki Company would have to purchase a special machine to engrave the retail chain's name on the 7,000 units. This machine would $14,000. Polaski Company future. Determine the impact on profits next year if this special order is accepted. on this order thus, variable has no assurance that the retail chain will purchase additional units in the Net profit MacBook A

Explanation / Answer

1 7000 units Per unit Amount Price of special order 48.72 341040 Cost for special order Direct material 25 175000 Direct Labor 10 70000 Variable manufacturing overheads 3 21000 Variable selling expense 0.5 3500 Machine cost 14000 Total cost 38.5 283500 Net Profit increased by 57540 Yes accept the order 2 Direct material 25 Direct Labor 10 Variable manufacturing overheads 3 Fixed cost per unit manufacturing 7 Fixed fees paid 1.8 Price of special order 46.8 Per unit Price of special order 46.8 Cost for special order Direct material 25 Direct Labor 10 Variable manufacturing overheads 3 Total cost 38 Profit per unit 8.8 Number of units 7000 Net profit increase by 61600 3 As company is working in full capacity Minimum price Total cost per unit 53 Add Profit margin 5 Less Variable selling cost -2 Special order price 56 Price of special order 46.8 Loss per unit 9.2 Number of units 7000 Net profit decreased by 64400

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