Homework SourseRefer to the original data Assume again that Polaski Company
Refer to the original data. Assume again that Polaski Company expects to sell only 35,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 9,000 Rets. The Army would pay a fixed fee of $1.80 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?
| Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 44,000 Rets per year. Costs associated with this level of production and sales are given below: |
Solution
Direct materials
| Variable cost | |
| Direct materials | 25 |
| Direct labor | 6 |
| Variable manufacturing overhead | 3 |
| Variable Cost Of production | 34 |
| Fixed manufacturing overhead | 7 |
| Cost of production per unit | 41 |
