Reference no: EM132804835
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 $160
Fixed manufacturing costs 39
Variable selling and administrative costs 82
Fixed selling and administrative costs 21
Total 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 $252
Variable manufacturing costs 160
Fixed manufacturing costs 39
Variable selling and administrative costs 51
Fixed selling and administrative costs 21
Net profit (loss) per case$(19)
Required:
Problem a. What is the impact on profit for the year if Alpine accepts the special order?
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