Alpine Luggage has a capacity to produce 360,000 suitcases peryear. The company is currently producing and selling 280,000 unitsper year at a selling price of $395 per case. The cost of producingand selling one case follows:
| | | |
| Variable manufacturingcosts | $ | 158 | |
| Fixed manufacturing costs | | 41 | |
| Variable selling andadministrative costs | | 82 | |
| Fixed selling and administrativecosts | | 21 | |
| Total costs | $ | 302 | |
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The company has received a special order for 20,000 suitcases ata price of $251 per case. It will not have to pay any salescommission on the special order, so the variable selling andadministrative costs would be only $50 per suitcase. The specialorder would have no effect on total fixed costs. The company hasrejected the offer based on the following computations:
| | | |
| Selling price percase | $ | 251 | |
| Variable manufacturingcosts | | 158 | |
| Fixed manufacturing costs | | 41 | |
| Variable selling andadministrative costs | | 50 | |
| Fixed selling and administrativecosts | | 21 | |
| Net profit (loss) per case | $ | (19 | ) |
|
Required:
a. What is the impact on profit for the year ifAlpine accepts the special order? (Enter your answers inthousands of dollars. Select option "higher" or "lower", keepingStatus Quo as the base. Select "none" if there is noeffect.)
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| | (All costs in $000) | | | | Status Quo 280,000 Units | Alternative 300,000 Units | Difference | | Sales revenue | | $115,620 | | higher | | Variable costs: | | | | | | Manufacturing | | | | higher | | Selling and administrative | | 23,960 | | higher | | Contribution margin | | | | higher | | Fixed costs | | | | none | | Operating profit | | | | higher |
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*************PLEASE SHOW ME HOW YOU GET EACH NUMBER IN THEBOXES. I HAVE THOSE TWO NUMBERS FILLED IN AND I DON'T REMEBER HOW IGOTTHEM.*****************************************************************
