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Homework answers / question archive / The company is currently producing and selling 330,000 units per year at a selling price of $395 per case
The company is currently producing and selling 330,000 units per year at a selling price of $395 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 $ 163 39 83 19 $ 304 The company has received a special order for 20,000 suitcases at a price of $250 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 $50 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 manufacturing costs Variable selling and administrative costs Fixed selling and administrative costs Net profit (los) per case $ 250 163 39 50 19 $(21) 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 5000) Status Quo Alternative 330,000 Units 350,000 Units Difference Sales revenue Variable costs Manufacturing Selling and administrative Contribution margin Fored costs Operating profit
b. Do you agree with the decision to reject the special order? Yes No
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