Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Alpine Luggage has a capacity to produce 420,000 suitcases per year. The company is currently producing and selling 340,000 units per year at a selling

Alpine Luggage has a capacity to produce 420,000 suitcases per year. The company is currently producing and selling 340,000 units per year at a selling price of $399 per case. The cost of producing and selling one case follows:

Variable manufacturing costs $ 157
Fixed manufacturing costs 40
Variable selling and administrative costs 84
Fixed selling and administrative costs 21
Total costs $ 302

The company has received a special order for 20,000 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 $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 $ 249
Variable manufacturing costs 157
Fixed manufacturing costs 40
Variable selling and administrative costs 51
Fixed selling and administrative costs 21
Net profit (loss) per case $ (20 )

image text in transcribed

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.) (All costs in $000) Status Quo Alternative 340,000 Units 360,000 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? No

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions