Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 36,000 Rets per year. Costs associated with this level of production and sales are given below: Unit Total Direct materials $ 25 $ 900,000 Direct labor 8 288,000 Variable manufacturing overhead 3 108,000
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
fix my answer:
5)Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 36,000 Rets per year. Costs associated with this level of production and sales are given below:
| Unit | Total | |
|---|---|---|
| Direct materials | $ 25 | $ 900,000 |
| Direct labor | 8 | 288,000 |
| Variable manufacturing overhead | 3 | 108,000 |
| Fixed manufacturing overhead | 7 | 252,000 |
| Variable selling expense | 4 | 144,000 |
| Fixed selling expense | 6 | 216,000 |
| Total cost | $ 53 | $ 1,908,000 |
The Rets normally sell for $58 each. Fixed manufacturing overhead is $252,000 per year within the range of 26,000 through 36,000 Rets per year.
Required:
- Assume due to a recession, Polaski Company expects to sell only 26,000 Rets through regular channels next year. A large retail chain offered to purchase 10,000 Rets if Polaski will 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 for $20,000 to engrave the retail chain’s name on the 10,000 units. 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?
Note: Round your intermediate calculations to 2 decimal places.
- Refer to the original data. Assume Polaski Company expects to sell 26,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 10,000 Rets. The Army would reimburse Polaski for all of the variable and fixed production costs assigned to the units by the company’s absorption costing system, plus it would pay an additional fee of $1.80 per unit. 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?
- Assume the same situation as described in (2) above, except the company expects to sell 36,000 Rets through regular channels next year. Thus, accepting the U.S. Army’s order would require giving up regular sales of 10,000 Rets. Given this new information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order?
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 3 images
