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Variable selling and administrative costs Fixed selling and administrative costs Total costs $ Selling price per case 32 $ 100 8 The company has received a special order for 5,000 suitcases at a price of $100 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 $20 per suitcase. The special order would have no effect on total fixed costs. The company has rejected the offer based on the following computations. 120

Variable selling and administrative costs Fixed selling and administrative costs Total costs $ Selling price per case 32 $ 100 8 The company has received a special order for 5,000 suitcases at a price of $100 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 $20 per suitcase. The special order would have no effect on total fixed costs. The company has rejected the offer based on the following computations. 120

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Alpine Luggage has a capacity to produce 200,000 suitcases per year. The company is currently producing and selling 80,000 units per year at a selling price of $160 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 The company has received a special order for 5,000 suitcases at a price of $100 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 $20 per suitcase. The special order would have no effect on total fixed costs. The company has rejected the offer based on the following computations. Net profit (loss) per case Sales revenue Variable costs: Manufacturing Selling and administrative Contribution margin Fixed costs Operating Profit $ 100 Status Quo 80.000 Units $ (All revenues and costs in $000) 64 16 20 8 $ (8 Required: a. What is the impact on profit for the year if Alpine accepts the special order? 64 16 32 8 120 ) Alternative 85,000 Units Difference
Transcribed Image Text:Alpine Luggage has a capacity to produce 200,000 suitcases per year. The company is currently producing and selling 80,000 units per year at a selling price of $160 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 The company has received a special order for 5,000 suitcases at a price of $100 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 $20 per suitcase. The special order would have no effect on total fixed costs. The company has rejected the offer based on the following computations. Net profit (loss) per case Sales revenue Variable costs: Manufacturing Selling and administrative Contribution margin Fixed costs Operating Profit $ 100 Status Quo 80.000 Units $ (All revenues and costs in $000) 64 16 20 8 $ (8 Required: a. What is the impact on profit for the year if Alpine accepts the special order? 64 16 32 8 120 ) Alternative 85,000 Units Difference
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