Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 46,000 Rets per year. Costs associated with this level of production and sales are given below: Unit TotalDirect materials$15 $690,000 Direct labor 6 276,000 Variable manufacturing overhead 3 138,000 Fixed manufacturing overhead 7 322,000 Variable selling expense 4 184,000 Fixed selling expense 6 276,000 Total cost$41 $1,886,000 The Rets normally sell for $46 each. Fixed manufacturing overhead is $322,000 per year within the range of 41,000 through 46,000 Rets per year. Assume the same situation as described in (2) above, except that the company expects to sell 46,000 Rets through regular channels next year. Thus, accepting the U.S. Army’s order would require giving up regular sales of 5,000 Rets. Given this new information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order?

Solution: Solution 3: Regular selling price $46.00 Less: Vaiable costs : Direct…

Answered: Unit Total Direct materials $ 15…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 6PA: Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A...

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Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 46,000 Rets per year. Costs associated with this level of production and sales are given below:

	Unit		Total
Direct materials	$	15		$	690,000
Direct labor		6			276,000
Variable manufacturing overhead		3			138,000
Fixed manufacturing overhead		7			322,000
Variable selling expense		4			184,000
Fixed selling expense		6			276,000
Total cost	$	41		$	1,886,000

The Rets normally sell for $46 each. Fixed manufacturing overhead is $322,000 per year within the range of 41,000 through 46,000 Rets per year.

Assume the same situation as described in (2) above, except that the company expects to sell 46,000 Rets through regular channels next year. Thus, accepting the U.S. Army’s order would require giving up regular sales of 5,000 Rets. Given this new information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order?

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