Alpine Luggage has a capacity to produce 370,000 suitcases per year. The company is currently producing and selling 290,000 units per year at a selling price of $399 per case. The cost of producing and selling one case follows:

Variable manufacturing costs	$	161
Fixed manufacturing costs		41
Variable selling and administrative costs		83
Fixed selling and administrative costs		18
Total costs	$	303

The company has received a special order for 30,000 suitcases at a price of $249 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 $50 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	$	249
Variable manufacturing costs		161
Fixed manufacturing costs		41
Variable selling and administrative costs		50
Fixed selling and administrative costs		18
Net profit (loss) per case	$	(21	)

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.)

	(All revenues and costs in $000)
	Status Quo 290,000 Units	Alternative 320,000 Units	Difference
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

• No