Question
Alpine Luggage has a capacity to produce 390,000 suitcases per year. The company is currently producing and selling 310,000 units per year at a selling
Alpine Luggage has a capacity to produce 390,000 suitcases per year. The company is currently producing and selling 310,000 units per year at a selling price of $395 per case. The cost of producing and selling one case follows: Variable manufacturing costs $ 160 Fixed manufacturing costs 40 Variable selling and administrative costs 81 Fixed selling and administrative costs 20 Total costs $ 301 The company has received a special order for 30,000 suitcases at a price of $250 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 $48 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 $ 250 Variable manufacturing costs 160 Fixed manufacturing costs 40 Variable selling and administrative costs 48 Fixed selling and administrative costs 20 Net profit (loss) per case $ (18 ) 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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