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 $400 per case. The cost of producing and selling one case follows: Variable manufacturing costs $ 160 Fix manufacturing costs 90 Variable selling and administrative costs 84 Fixed selling and administrative costs 20 Total costs $ 303 The company has received a special order for 30,000 suitcases at a price of $248 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 $ 248 Variable manufacturing costs 160 Fixed manufacturing costs 39 Variable selling and administrative costs 51 Fixed selling and administrative costs 20 Net profit (loss) per case $ (22) 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 340,000 Alternative 370,000 units Difference Sales revenue ? ? ? (high, lower, none) Variable costs: ? ? ? " " Manufacturing ? ? ? " " Selling and administrative ? ? ? " " Contribution margin ? ? ? " " Fixed cost ? ? ? " " Operating profit ? ? ? " " b. Do you agree with the decision to reject the special order? ____ Yes ____ No
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 $400 per case. The cost of producing and selling one case follows:
Variable
Fix manufacturing costs 90
Variable selling and administrative costs 84
Fixed selling and administrative costs 20
Total costs $ 303
The company has received a special order for 30,000 suitcases at a price of $248 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 $ 248
Variable manufacturing costs 160
Fixed manufacturing costs 39
Variable selling and administrative costs 51
Fixed selling and administrative costs 20
Net
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 340,000 Alternative 370,000 units Difference
Sales revenue ? ? ? (high, lower, none)
Variable costs: ? ? ? " "
Manufacturing ? ? ? " "
Selling and administrative ? ? ? " "
Contribution margin ? ? ? " "
Fixed cost ? ? ? " "
Operating profit ? ? ? " "
b. Do you agree with the decision to reject the special order?
____ Yes
____ No
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