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Problem 9-5 Determining Whether to Accept or Reject a Special Order (LO1 CC5) Polaski Company manufactures and sells a single product called a Ret

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Problem 9-5 Determining Whether to Accept or Reject a Special Order (LO1 CC5) Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 24,000 Rets per year. Costs associated with this level of production and sales are as follows: Unit Total $16.50 396,000 Direct materials 228,000 Direct labour 9.50 Variable manufacturing 108,000 4.50 overhead Fixed manufacturing overhead 10.50 252,000 96,000 Variable selling expense 4.00 144,000 Fixed selling expense 6.00 Total cost $51.00 $1,224,000 The Rets normally sell for $56 each. Fixed manufacturing overhead is constant at $252,000 per year within the range of 16,000 through 24,000 Rets per year. Required: 1. Assume that, due to a recession, Polaski Company expects to sell only 16,000 Rets through regular channels next year. A large retail chain has offered to purchase 8,000 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 8,000 units. This machine would cost $16,000. Polaski Company has no assurance that the retail chain will purchase additional units any time in the future. Determine the impact on profits next year if this special order is accepted. in profits