Alpine Luggage has a capacity to produce 440,000 suitcases per year. The company is currently producing and selling 360,000 units per year at a selling price of $402 per case. The cost of producing and selling one case follows:
Variable manufacturing costs $ 158 Fixed manufacturing costs 40 Variable selling and administrative costs 81 Fixed selling and administrative costs 18 Total costs $ 297
The company has received a special order for 30,000 suitcases at a price of $251 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 $ 251 Variable manufacturing costs 158 Fixed manufacturing costs 40 Variable selling and administrative costs 50 Fixed selling and administrative costs 18 Net profit (loss) per case $ (15 )
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.)
Incremental analysis
Incremental revenue (30000*251) | 7530000 |
Incremental Cost | |
Variable manufacturing cost (30000*158) | 4740000 |
Variable selling and administrative cost (30000*50) | 1500000 |
Total Incremental Cost | 6240000 |
Incremental profit (loss) | 1290000 |
If company accepts special order net operating income will increase by $1290000
Alpine Luggage has a capacity to produce 440,000 suitcases per year. The company is currently producing...
Alpine Luggage has a capacity to produce 440,000 suitcases per year. The company is currently producing and selling 360,000 units per year at a selling price of $399 per case. The cost of producing and selling one case follows: Variable manufacturing costs $ 162 Fixed manufacturing costs 40 Variable selling and administrative costs 79 Fixed selling and administrative costs 20 Total costs $ 301 The company has received a special order for 30,000 suitcases at a price of $248 per...
Alpine Luggage has a capacity to produce 380,000 suitcases per year. The company is currently producing and selling 300,000 units per year at a selling price of $403 per case. The cost of producing and selling one case follows: Variable manufacturing costs $ 156 Fixed manufacturing costs 41 Variable selling and administrative costs 80 Fixed selling and administrative costs 20 Total costs $ 297 The company has received a special order for 40,000 suitcases at a price of $251 per...
Alpine Luggage has a capacity to produce 410,000 suitcases per year. The company is currently producing and selling 330,000 units per year at a selling price of $405 per case. The cost of producing and selling one case follows: Variable manufacturing costs $ 160 Fixed manufacturing costs 40 Variable selling and administrative costs 81 Fixed selling and administrative costs 22 Total costs $ 303 The company has received a special order for 30,000 suitcases at a price of $251 per...
Alpine Luggage has a capacity to produce 360,000 suitcases per year. The company is currently producing and selling 280,000 units per year at a selling price of $401 per case. The cost of producing and selling one case follows: Variable manufacturing costs $ 165 Fixed manufacturing costs 40 Variable selling and administrative costs 83 Fixed selling and administrative costs 19 Total costs $ 307 The company has received a special order for 30,000 suitcases at a price of $251 per...
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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 $397 per case. The cost of producing and selling one case follows: Variable manufacturing costs $ 165 Fixed manufacturing costs 41 Variable selling and administrative costs 81 Fixed selling and administrative costs 20 Total costs $ 307 The company has received a special order for 30,000 suitcases at a price of $248 per...
Alpine Luggage has a capacity to produce 360,000 suitcases per year. The company is currently producing and selling 280,000 units per year at a selling price of $399 per case. The cost of producing and selling one case follows: $ 164 Variable manufacturing costs Fixed manufacturing costs Variable selling and administrative costs Fixed selling and administrative costs Total costs 80 $ 302 The company has received a special order for 40,000 suitcases at a price of $250 per case. It...
Alpine Luggage has a capacity to produce 390,000 suitcases per year. The company is currently producing and selling 310,000 units per year at a selling price of $404 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 $ 156 41 84 20 $ 301 The company has received a special order for 30,000 suitcases at a price of $249 per...
Alpine Luggage has a capacity to produce 430,000 suitcases per year. The company is currently producing and selling 350,000 units per year at a selling price of $397 per case. The cost of producing and selling one case follows: $161 40 Variable manufacturing costs Fixed manufacturing costs Variable selling and administrative costs Fixed selling and administrative costs Total costs 21 $306 The company has received a special order for 40,000 suitcases at a price of $249 per case. It will...