Alpine Luggage has a capacity to produce 440,000 suitcases per year. The company is currently producing and selling 360,000 units per year at a selling price of $402 per case. The cost of producing and selling one case follows:

Variable manufacturing costs	$	162
Fixed manufacturing costs		39
Variable selling and administrative costs		85
Fixed selling and administrative costs		18
Total costs	$	304

The company has received a special order for 30,000 suitcases at a price of $252 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	$	252
Variable manufacturing costs		162
Fixed manufacturing costs		39
Variable selling and administrative costs		50
Fixed selling and administrative costs		18
Net profit (loss) per case	$	(17	)

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 revenues and costs in $000)
	Status Quo 360,000 Units	Alternative 390,000 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?

multiple choice

Yes

No