Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and

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Polaski Company manufactures and sells a single product called a
Ret. Operating at capacity, the company can produce and sell 38,000
Rets per year. Costs associated with this level of production and
sales are given below:
The Rets normally sell for $50 each. Fixed manufacturing
overhead is $266,000 per year within the range of 32,000 through
38,000 Rets per year.
Required:
1. Assume that due to a recession, Polaski Company expects to
sell only 32,000 Rets through regular channels next year. A large
retail chain has offered to purchase 6,000 Rets if Polaski is
willing to accept a 16% discount off the regular price. There would
be no sales commissions on this order; thus, variable 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 6,000 units. This machine would cost $12,000. Polaski
Company has no assurance that the retail chain will purchase
additional units in the future. What is the financial advantage
(disadvantage) of accepting the special order? (Round
your intermediate calculations to 2 decimal places.)
2. Refer to the original data. Assume again that Polaski Company
expects to sell only 32,000 Rets through regular channels next
year. The U.S. Army would like to make a one-time-only purchase of
6,000 Rets. The Army would reimburse Polaski for all of the
variable and fixed production costs assigned to the units by the
company’s absorption costing system, plus it would pay an
additional fee of $1.80 per unit. Because the army would pick up
the Rets with its own trucks, there would be no variable selling
expenses associated with this order. What is the financial
advantage (disadvantage) of accepting the U.S. Army's special
order?
3. Assume the same situation as described in (2) above, except
that the company expects to sell 38,000 Rets through regular
channels next year. Thus, accepting the U.S. Army’s order would
require giving up regular sales of 6,000 Rets. Given this new
information, what is the financial advantage (disadvantage) of
accepting the U.S. Army's special order?