Alpine Luggage has a capacity to produce 360,000 suitcases per year. The company is currently producing and selling 280,000 units per year at a selling price of $401 per case. The cost of producing and selling one case follows:

Variable manufacturing costs	$	165
Fixed manufacturing costs		40
Variable selling and administrative costs		83
Fixed selling and administrative costs		19
Total costs	$	307

The company has received a special order for 30,000 suitcases at a price of $251 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 $51 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	$	251
Variable manufacturing costs		165
Fixed manufacturing costs		40
Variable selling and administrative costs		51
Fixed selling and administrative costs		19
Net profit (loss) per case	$	(24	)

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 280,000 Units Alternative 310,000 Units Difference higher or lower?

Sales revenue

Variable costs:

Manufacturing

Selling and administrative

Contribution margin

Fixed costs

Operating profit

b. Do you agree with the decision to reject the special order?

yes or no?