Alpine Luggage has a capacity to produce 200,000 suitcases per year. The company is currently producing and selling 80,000 units per year at a selling price of $160 per case. The cost of producing and selling one case follows.

Variable manufacturing costs	$	64
Fixed manufacturing costs		16
Variable selling and administrative costs		32
Fixed selling and administrative costs		8
Total costs	$	120

The company has received a special order for 5,000 suitcases at a price of $100 per case. It will not have to pay any sales commission on the special order, so the variable selling and administrative costs would be only $20 per suitcase. The special order would have no effect on total fixed costs. The company has rejected the offer based on the following computations.

Selling price per case	$	100
Variable manufacturing costs		64
Fixed manufacturing costs		16
Variable selling and administrative costs		20
Fixed selling and administrative costs		8
Net profit (loss) per case	$	(8	)

Required:

a. What is the impact on profit for the year if Alpine accepts the special order? (Enter your answers in thousands of dollars. Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.)

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Item 1 0.75 points

Exercise 4-37 (Static) Special Orders (LO 4-1, 2)

Alpine Luggage has a capacity to produce 200,000 suitcases per year. The company is currently producing and selling 80,000 units per year at a selling price of $160 per case. The cost of producing and selling one case follows.

Variable manufacturing costs	$	64
Fixed manufacturing costs		16
Variable selling and administrative costs		32
Fixed selling and administrative costs		8
Total costs	$	120

The company has received a special order for 5,000 suitcases at a price of $100 per case. It will not have to pay any sales commission on the special order, so the variable selling and administrative costs would be only $20 per suitcase. The special order would have no effect on total fixed costs. The company has rejected the offer based on the following computations.

Selling price per case	$	100
Variable manufacturing costs		64
Fixed manufacturing costs		16
Variable selling and administrative costs		20
Fixed selling and administrative costs		8
Net profit (loss) per case	$	(8	)

Required:

a. What is the impact on profit for the year if Alpine accepts the special order? (Enter your answers in thousands of dollars. Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.)

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Item 1

Item 1 0.75 points

Exercise 4-37 (Static) Special Orders (LO 4-1, 2)

Alpine Luggage has a capacity to produce 200,000 suitcases per year. The company is currently producing and selling 80,000 units per year at a selling price of $160 per case. The cost of producing and selling one case follows.

Variable manufacturing costs	$	64
Fixed manufacturing costs		16
Variable selling and administrative costs		32
Fixed selling and administrative costs		8
Total costs	$	120

The company has received a special order for 5,000 suitcases at a price of $100 per case. It will not have to pay any sales commission on the special order, so the variable selling and administrative costs would be only $20 per suitcase. The special order would have no effect on total fixed costs. The company has rejected the offer based on the following computations.

Selling price per case	$	100
Variable manufacturing costs		64
Fixed manufacturing costs		16
Variable selling and administrative costs		20
Fixed selling and administrative costs		8
Net profit (loss) per case	$	(8	)

Required:

a. What is the impact on profit for the year if Alpine accepts the special order? (Enter your answers in thousands of dollars. Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.)

Status Quo 80,0000 Alternative 85,000 Difference

Sales Revenue ? ? ?

Variable costs:

Manufacturing ? ? ?

Selling and Administrative ? ? ?

Contribution margin ? ? ?

Fixed costs ? ? ?

Operating Profit ? ? ?