Connect MyOdu | Main view Registration Go Polaski Company manufactures and sells

Question

Connect MyOdu | Main view Registration Go Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 40,000 Rets per year. Costs associated with this level of production and sales are given below Total Unit $ 25 $1,000,000 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed seling expense 240,000 120,000 280,000 160,000 240,000 Total cost $51 2,040,000 The Rets normally sell for $56 each. Fixed manufacturing overhead is constant at $280,000 per year within the range of 32,000 through 40,000 Rets per year Required: 1. Assume that due to a recession, Polaski Company expects to sell only 32.000 Rets through regular channels next year. A large retil chain has offered to purchase 8,000 Rets if Polaski is willing to accept a 16% discount off the regular price There would be no sales commissions on this order 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 8,000 units. This machine would cost $16,000. Polaski Company ha future. Determine the impact on profits next year if this special order is accepted s no assurance that the retail chain will purchase additional units in the profit 2 Refer to Pe orgincata Assumc again trat.Rolask Company xpects to re onty 32000 Rets threuch ar channeis next yoar Tne U.S Artty would siks to make a ane-time only purchase of 8.000 Rets regua wou'd pay a foed tee ot $1 40 per Ret, and it would reamburse Polask Company for al coats rdecrease for the yea? MacBook Air esc

Explanation / Answer

a)Expected selling price on offer 56(1-.16) = 47.04

While making decision about special offer only variable cost is relevant as fixed cost will be incurred whether offer is accepted or not .

Variable cost of sales :Direct material +direct labor +variable overhead

      = 25+ 6+ 3

      = 34

Variable selling expense "4(1-.75)= 1

Net Profit will increase by$ 80320

Profit on special offer will Increase /(decrease) by Revenue [47.04* 8000] 376320 less:variable cost of sales [34*8000] (272000) variable selling [1*8000] (8000) special machine (16000) Net Income on special offer 80320

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.