Alpine Luggage has a capacity to produce 430.000 sultcases per year. The company is currently producing and selling 350,000 units per year at a selling price of $400 per case. The cost of producing and selling one case follows: Variable manufacturing costs Fixed manufacturing costs Variable selling and administrative costs Fixed selling and administrative costs Total costs The company has received a special order for 40,000 sultceses 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 $52 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 Variable manufacturing costs Fixed facturing costs Variable selling and administrative costs Fixed selling and administrative costs Net profit (lass) per case Sales revenue Variable costs $156 Manufacturing Selling and administrative Contribution margin Fixed costs Operating profit Required: a. What is the impact on profit for the year of Alpine accepts the special order? (Enter your answers in thousands of dollars. Select option "higher" or "Tower, keeping Status Quo as the base. Select "none" if there is no effect.) Ⓒ Yes O No 156 52 $ (21) (All revenues and costs in 8000) Status Quo Alternative 360,000 Units 380,000 Units b. Do you agree with the decision to reject the special order? Difference
Alpine Luggage has a capacity to produce 430.000 sultcases per year. The company is currently producing and selling 350,000 units per year at a selling price of $400 per case. The cost of producing and selling one case follows: Variable manufacturing costs Fixed manufacturing costs Variable selling and administrative costs Fixed selling and administrative costs Total costs The company has received a special order for 40,000 sultceses 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 $52 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 Variable manufacturing costs Fixed facturing costs Variable selling and administrative costs Fixed selling and administrative costs Net profit (lass) per case Sales revenue Variable costs $156 Manufacturing Selling and administrative Contribution margin Fixed costs Operating profit Required: a. What is the impact on profit for the year of Alpine accepts the special order? (Enter your answers in thousands of dollars. Select option "higher" or "Tower, keeping Status Quo as the base. Select "none" if there is no effect.) Ⓒ Yes O No 156 52 $ (21) (All revenues and costs in 8000) Status Quo Alternative 360,000 Units 380,000 Units b. Do you agree with the decision to reject the special order? Difference
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Alpine Luggage has a capacity to produce 430,000 sultcases per year. The company is currently producing and selling 350,000 units
per year at a selling price of $400 per case. The cost of producing and selling one case follows:
Variable manufacturing costs
Fixed manufacturing costs
Variable selling and administrative costs
Fixed selling and administrative costs
Total costs
Selling price per case
Variable manufacturing costs
Fixed manufacturing costs
Variable selling and administrative costs
Fixed selling and administrative costs
Net profit (loss) per case
The company has received a special order for 40,000 sultcases 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 $52 per sultcase. The special order
would have no effect on total fixed costs. The company has rejected the offer based on the following computations:
Sales revenue
Variable costs
Manufacturing
Selling and administrative
Contribution margin
$ 156
Fixed costs
Operating profit
82
1300
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.)
Ⓒ Yes
O No
156
(All revenues and costs In 8000)
Status Quo
Alternative
360,000 Units $80,000 Units
52
$ (21)
b. Do you agree with the decision to reject the special order?
Difference
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