Alpine Luggage has a capacity to produce 370,000 suitcases per year. The company is currently producing and
Question:
Alpine Luggage has a capacity to produce 370,000 suitcases per year. The company is currently producing and selling 290,000 units per year at a selling price of $402 per case. The cost of producing and selling one case follows:
Variable manufacturing costs$160Fixed manufacturing costs39Variable selling and administrative costs82Fixed selling and administrative costs21Total costs$302
The company has received a special order for 20,000 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 $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$252Variable manufacturing costs160Fixed manufacturing costs39Variable selling and administrative costs51Fixed selling and administrative costs21Net profit (loss) per case$(19)
Required:
a.What is the impact on profit for the year if Alpine accepts the special order?
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Alpine Luggage has a capacity to produce 370,000 suitcases per year. The company is currently producing and selling 290,000 units per year at a selling price of $402 per case. The cost of producing and selling one case follows:
Variable manufacturing costs$160Fixed manufacturing costs39Variable selling and administrative costs82Fixed selling and administrative costs21Total costs$302
The company has received a special order for 20,000 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 $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$252Variable manufacturing costs160Fixed manufacturing costs39Variable selling and administrative costs51Fixed selling and administrative costs21Net profit (loss) per case$(19)
Required:
a.What is the impact on profit for the year if Alpine accepts the special order?
status quo 290,000 units Alternative 310,000 units difference
sales revenue
variable cost:
manufactoring
selling and administrative
contribution margin
fixed costs
operating profit
Expert Answer:
Lets calculate the impact on profit for the year if Alpine accepts the special order First lets calculate the current profit with the status quo produ... View the full answer
