Polaski Company manufactures and sells a single product called a Ret. Operating
ID: 2577540 • Letter: P
Question
Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 42,000 Rets per year. Costs associated with this level of production and sales are given below: Unit Total $20 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense Total cost 840,000 420, 126, 210, 000 168, 252,000 2,016, 000 10 3 4 6 $48 The Rets normally sell for $53 each. Fixed manufacturing overhead is $210,000 per year within the range of 37,000 through 42,000 Rets per yearExplanation / Answer
1. Calcuation of Addtional Contribution on acceptance of special order.
Particulars
Amount ($)
Sales on special order (5,000 x 53 x 84%)
222,600
Less: Variable Costs
Materials ($20 x 5,000)
100,000
Labor (10 x 5,000)
50,000
Manufacturing Overheads
15,000
Variable Selling (4 x 25% x 5,000)
5,000
Purchase of Special Machine
10,000
Contribution from special order
42,600
NOTE: Fixed Selling expenses are bound to be incurred at the same amount till 42,00 rets if production and are therefore not considered for contribution from special order.
Particulars
Amount ($)
Sales on special order (5,000 x 53 x 84%)
222,600
Less: Variable Costs
Materials ($20 x 5,000)
100,000
Labor (10 x 5,000)
50,000
Manufacturing Overheads
15,000
Variable Selling (4 x 25% x 5,000)
5,000
Purchase of Special Machine
10,000
Contribution from special order
42,600