Polaski Company manufactures and sells a single product called a Ret. Operating
ID: 2525923 • Letter: P
Question
Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 32,000 Rets per year. Costs associated with this level of production and sales are given below: ni Total Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense $25$ 800,000 256,000 96,000 224,000 128,000 192,000 4 6 Total cost $53 $ 1,696,000 The Rets normally sell for $58 each. Fixed manufacturing overhead is constant at $224,000 per year within the range of 25,000 through 32,000 Rets per yearExplanation / Answer
Solution 1:
Therefore net profit increases by $68,040 if special order is accepted
Solution 2:
Production cost per unit = $25 + $8 + $3 + $7 = $43
Price offered by US Army = $43 + $1.80 = $44.80
Net profit increases by $61,600 if US Army order is accepted.
Solution 3:
Contribution per unit from regular sale = $58 - $25 - $8 - $3 - $4 = $18 per unit
Net profit decreases by $64,400, if US Army orderis accepted.
Computation of profit from special order - Polaski company Particulars Amount Sales (7000*$48.72) $341,040.00 Variable Cost: Direct material (7000*$25) $175,000.00 Direct labor (7000*$8) $56,000.00 Variable manufacturing overhead (7000*$3) $21,000.00 Variable selling expenses (7000*$1) $7,000.00 Contribution $68,040.00 Additional fixed cost of machine $14,000.00 Net Profit from special order $68,040.00