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Problem 11-22 Special Order Decisions (LO11-4) Polaski Company manufactures and sells a single product called a Ret. Operatin
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Answer #1

Solution 1:

Special order price = $46*84% = $38.64 per unit

Computation of profit from special order - Polaski company
Particulars Amount
Sales (7000*$38.64) $270,480.00
Variable Cost:
Direct material (7000*$15) $105,000.00
Direct labor (7000*$8) $56,000.00
Variable manufacturing overhead (7000*$3) $21,000.00
Variable selling expenses (7000*$1) $7,000.00
Contribution $81,480.00
Additional fixed cost of machine $14,000.00
Financial advantage (disadvantage) $67,480.00

Solution 2:

Price for US Army order = Unit product cost + Fixed fee

= ($15 + $8 + $3+ $5) + $1.40 = $32.40 per unit

Computation of profit from US Army order - Polaski company
Particulars Amount
Sales (7000*$32.40) $226,800.00
Variable Cost:
Direct material (7000*$15) $105,000.00
Direct labor (7000*$8) $56,000.00
Variable manufacturing overhead (7000*$3) $21,000.00
Contribution $44,800.00
Additional fixed cost $0.00
Financial advantage (disadvantage) $44,800.00

solution 3:

Regular contribution margin per unit = $46 - ($15 + $8 + $3 + $4) = $16 per unit

Computation of profit from US Army order - Polaski company
Particulars Amount
Sales (7000*$32.40) $226,800.00
Variable Cost:
Direct material (7000*$15) $105,000.00
Direct labor (7000*$8) $56,000.00
Variable manufacturing overhead (7000*$3) $21,000.00
Contribution $44,800.00
Less: Loss of contribution from regular sale (7000*$16) $112,000.00
Financial advantage (disadvantage) -$67,200.00
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