HA-11 (P12-22) x Course Documents-AC x C ezto.mheducation.com/hm.tpx?-0.41627022
ID: 2397898 • Letter: H
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HA-11 (P12-22) x Course Documents-AC x C ezto.mheducation.com/hm.tpx?-0.4162702256240236 1530809917447 Polaski Company manufactures and sells a single product called a Ret Operating at capacity, the company can produce and sell 34,000 Rets per year. Costs associated with this level of production and sales are given belovw S20 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense 680,000 272,000 102,000 238,000 136,000 204,000 Total cost $48 1,632,000 The Rets normally sell for $53 each. Fixed manufacturing overhead is constant at $238,000 per year within the range of 26,000 through 34,000 Rets per year Required: 1. Assume that due to a recession, Polaski Company expects to sell only 26,000 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, vanable 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. Determine the impact on profits next year if this special order is accepted 2. Refer to the original data Assume again that Polaski Company expects to sell only 26,000 Rets through regular channels next year. The US. Army would like to make a one-time-only purchase of 8,000 Rets The Army would pay a fioxed fee of $1.60 per Ret, and it would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. Because the army would pick up the Rets with its own trucks, there would be no variable selling expenses associated with this order If Polaski Company accepts the order, by how much will profits increase or decrease for the year? Type here to seardhExplanation / Answer
Solution:
Regular selling price = $53
Selling price for special order = $53 * 84% = $44.52
Therefore net profit will increase by $84,160 on accepting special order.
Solution 2:
Price offered by US Army = Production cost per unit + $1.60
= $20 + $8 + $3 + $7 + $1.60 = $39.60
Hence net profit will increase by $68,800 on accepting the army order.
Solution 3:
Regular contribution margin per unit = $53 - $20 - $8 - $3 - $4 = $18 per unit
Therefore net profit will decrease by $75,200 on accepting army order.
Computation of profit from special order - Polaski company Particulars Amount Sales (8000*$44.52) $356,160.00 Variable Cost: Direct material (8000*$20) $160,000.00 Direct labor (8000*$8) $64,000.00 Variable manufacturing overhead (7000*$3) $24,000.00 Variable selling expenses (8000*$1) $8,000.00 Contribution $100,160.00 Additional fixed cost of machine $16,000.00 Net Profit from special order $84,160.00Related Questions
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