ggestedSit Web Sice Gallery Presious Attempt View Polaski Company manufactures a
ID: 2436707 • Letter: G
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ggestedSit Web Sice Gallery Presious Attempt View Polaski Company manufactures and sells a single product ealled a Ret Operatng at eapacity, the company can produce and sell 30,000 Rots per year Costs associated with this level of prodaction and sales are given below Direct materiaks Direct labor Variable manufacturing overhead Foxed manufacturing overhead Vanable selling expense Foxed seling exponse 15 450 000 90.000 270,000 120,000 80,000 Total cost $45 1.350,000 The Riets normaly sel for $50 each.Fxed within the range of 25,000 through 30,000 Rets per yoar Fowed manudacturing overhead ia constant at $270.000 per year a recession, Polaski Compary expects to sell only 25,000 Rets through reguiar s wilng to accet t. Assume that dus to channels neat year. A a 16% discount ofthe regar seling expenses would be slashed by 75% However Polask Conery would hve o rebase a special machine to engrave the retal chain's name on tha 5,000 uns This machine price. There would be no sales commissions on the engrave the retal chain's name on t? 5000 unta This machine wxld east ance that the rotail chan wil purchase addbional unis in the future. Determine the impact on profits naxt year if this special order is accepted data Assume agan that Polaski Company expects to sell only 25 000 Rets through purchase of 5.000 Res ki Company for al coets amy woud pick up the Ret with the order i Peask 2 Refer to the onginal regular channels next year The U.S Army would ike to make a one-time-only The Pamy would pay a fxed tee of $1 80 of production (variable and foid) associaled wth the units. Because the per Ret, and it would reimburse Polas weith its own trucks, there would be no variable seling expenses associatod Company accepts the order, by how much wial profits increase or decrease for the year?Explanation / Answer
Answer 1. Statement of Incremental Profit if Special Order is accepted - 5,000 Rets Incremental Revenue Sales Revenue from Special Order - 5,000 Nos X $42 210,000.00 Incremental Cost Direct Material - 5,000 Nos X $15 (75,000.00) Direct Labor - 5,000 Nos X $8 (40,000.00) Variable MOH - 5,000 Nos X $3 (15,000.00) Variable Selling Exp. - 5000 Nos X ($4 X 25%) (5,000.00) Purchase of Special Machine (10,000.00) (145,000.00) Incremental Net Income / (Loss) 65,000.00 Answer 2. Calculation of Sales Price to US Army per Unit Direct Material 15.00 Direct Labor 8.00 Variable MOH 3.00 Fixed MOH 9.00 Total Cost 35.00 Add: Mark Up 1.80 Total Selling price 36.80 Statement of Incremental Profit if Special Order is accepted -5,000 Rets Incremental Revenue Sales Revenue from Special Order - 5000 Nos X $36.80 184,000.00 . Incremental Cost Direct Material - 5,000 Nos X $15 (75,000.00) Direct Labor - 5,000 Nos X $8 (40,000.00) Variable MOH - 5,000 Nos X $3 (15,000.00) (130,000.00) Incremental Net Income / (Loss) 54,000.00 Answer 3. Statement of Incremental Profit if Special Order is accepted Incremental Revenue Sales Revenue from Special Order - 5000 Nos X $36.80 184,000.00 Savings of Variable Selling Exp. - 5000 Nos X $4 20,000.00 204,000.00 Incremental Cost Direct Material - 5,000 Nos X $15 (75,000.00) Direct Labor - 5,000 Nos X $8 (40,000.00) Variable MOH - 5,000 Nos X $3 (15,000.00) Loss of Contribution from regular Sales - 5000 Nos X ($50 - $30) (100,000.00) (230,000.00) Incremental Net Income / (Loss) (26,000.00)
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