Required: 1. Assume that due to a recession, Polaski Company expects to sell only 42,000 Rets through regular channels next year. A large retail 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; 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 8,000 units. This machine would cost $16,000. 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. 2. Refer to the original data. Assume again that Polaski Company expects to sell only 42,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 8,000 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 $1.40 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? 3. Assume the same situation as described in (2) above, except that the company expects to sell 50,000 Rets through regular channels next year. Thus, accepting the U.S. Army's order would require giving up regular sales of 8,000 Rets. Given this new information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order? 1. 2. 3.
Required: 1. Assume that due to a recession, Polaski Company expects to sell only 42,000 Rets through regular channels next year. A large retail 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; 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 8,000 units. This machine would cost $16,000. 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. 2. Refer to the original data. Assume again that Polaski Company expects to sell only 42,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 8,000 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 $1.40 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? 3. Assume the same situation as described in (2) above, except that the company expects to sell 50,000 Rets through regular channels next year. Thus, accepting the U.S. Army's order would require giving up regular sales of 8,000 Rets. Given this new information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order? 1. 2. 3.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Problem 6-24 (Algo) Special Order Decisions [LO6-4]
Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell
50,000 Rets per year. Costs associated with this level of production and sales are given below:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling expense
Fixed selling expense
Total cost
Unit
$ 20
8
3
9
2
6
$ 48 $ 2,400,000
Total
$ 1,000,000
400,000
150,000
450,000
100,000
300,000
The Rets normally sell for $53 each. Fixed manufacturing overhead is $450,000 per year within the range of 42,000 through 50,000
Rets per year.
Required:
1. Assume that due to a recession, Polaski Company expects to sell only 42,000 Rets through regular channels next year. A large
retail 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; 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 8,000 units. This machine would cost $16,000. 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.
2. Refer to the original data. Assume again that Polaski Company expects to sell only 42,000 Rets through regular channels next year.
The U.S. Army would like to make a one-time-only purchase of 8,000 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
$1.40 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 the financial advantage (disadvantage) of accepting the U.S. Army's special order?
1.
2.
3.
3. Assume the same situation as described in (2) above, except that the company expects to sell 50,000 Rets through regular
channels next year. Thus, accepting the U.S. Army's order would require giving up regular sales of 8,000 Rets. Given this new
information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F03da3cbb-5d32-4929-84df-255dd1b90a03%2F33ff59bc-7139-4286-84ce-3e5be4f5b96e%2F27gp5kq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 6-24 (Algo) Special Order Decisions [LO6-4]
Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell
50,000 Rets per year. Costs associated with this level of production and sales are given below:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling expense
Fixed selling expense
Total cost
Unit
$ 20
8
3
9
2
6
$ 48 $ 2,400,000
Total
$ 1,000,000
400,000
150,000
450,000
100,000
300,000
The Rets normally sell for $53 each. Fixed manufacturing overhead is $450,000 per year within the range of 42,000 through 50,000
Rets per year.
Required:
1. Assume that due to a recession, Polaski Company expects to sell only 42,000 Rets through regular channels next year. A large
retail 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; 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 8,000 units. This machine would cost $16,000. 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.
2. Refer to the original data. Assume again that Polaski Company expects to sell only 42,000 Rets through regular channels next year.
The U.S. Army would like to make a one-time-only purchase of 8,000 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
$1.40 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 the financial advantage (disadvantage) of accepting the U.S. Army's special order?
1.
2.
3.
3. Assume the same situation as described in (2) above, except that the company expects to sell 50,000 Rets through regular
channels next year. Thus, accepting the U.S. Army's order would require giving up regular sales of 8,000 Rets. Given this new
information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order?
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