Business, 28.05.2020 02:59 lobatospitones
Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 48,000 Rets per year. Costs associated with this level of production and sales are given below: Unit Total Direct materials $ 15 $ 720,000 Direct labor 6 288,000 Variable manufacturing overhead 3 144,000 Fixed manufacturing overhead 9 432,000 Variable selling expense 2 96,000 Fixed selling expense 6 288,000 Total cost $ 41 $ 1,968,000 The Rets normally sell for $46 each. Fixed manufacturing overhead is $432,000 per year within the range of 41,000 through 48,000 Rets per year. Required: 1. Assume that due to a recession, Polaski Company expects to sell only 41,000 Rets through regular channels next year. A large retail chain has offered to purchase 7,000 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 7,000 units. This machine would cost $14,000. 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?
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Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the com...
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