ezto mheducation.com Chapter 10 Homework Sof Polaski Company manufactures and se
ID: 2542437 • Letter: E
Question
ezto mheducation.com Chapter 10 Homework Sof Polaski Company manufactures and sellis a single product called a Ret. Operating at capacity, the company can produce and sell 30,000 Rets per year. Costs associated with this level of production and sales are given below Direct materials Direct labor Varlable manufacturing overhead Fued manufacturing overhead Variable seling expense Fixed seling expense $20 600,000 180,000 90.000 150,000 60,000 180,000 Total cost $42 1,260,000 The Rets nomally sell for $47 each Fixed manufacturing overhead is constant at $150,000 per year within the range of 24,000 through 30,000 Rets per year 1. Assume that due to a recession, Polaski Company expects to sell only 24,000 Rets through regular channels eot year. A lange retail chain has offered to purchase 6,000 Rets Polaski is willing to accept a10% discount off the regular prion There would be no sales commissons on this order, thus varable selrg expenses w uld be slashed by 75%. However, Poliski Company would have to purchase a machine to engrave the retail chain's name on the 6.000 unts. This machine would cost no assurance that the retail chain will purchase additional units in the $12,000. Polaski Company has uture. Determine the impact on profits next year if Pris special order is accepted Refer to the ergn daa Assurreagan thatPolaski Compay roguar channeis next year. The US. Army would ike to make a The Army would pay a txed soo of S1.40 Ret, and i expects to sell only 24,000 Rets theough one-time-only purchase of 6,000 Rets t would reimburse Polaski Company for all costsExplanation / Answer
Req 1: Incremental profits on Special order of 6,000 units Incremental sales revenue (6000 units @ 47-16% i.e. @ 39.48) 236880 Less: Incremntal cost Direct Material (6000 units @ 20) 120000 labour (6000 units @ 6) 36000 manufacturing OH (6000 units @ 3) 18000 Variable selling expense (6000 units @0.50) 3000 Additional machine cost 12000 Incremental profits 47880 Net profits increased by $ 47,880 Req 2: Incremental profits from Army order of 6000 units Incremnetal sales revenue (6000 units @ 35.40) 212400 Less: Incremental cost: Direct material (6000 units @20) 120000 labour cost (6000 units @6) 36000 Manufacturing OH (6000 units @3) 18000 Incremental profits 38400 Net profits increassed by $ 38400 Note: Selling priice per unit : total mnaufacturing cost+1.40 per unit (i.e.20+6+3+5+1.40) Req 3: Accepting the Army order wll result in loss of revenue regular: Incremental profits as computed above 38400 Less: Loss of contribution -96000 (6000 units @ 16) Incremental loss -57600 Net profits decreassed by $57600 Note: Contribution per unit from regular customer: 47 - (20+6+3+2)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.