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 selliby price of $403 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 $ 162 40 79 20 $ 301 The company has received a special order for 20,000 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 $49 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 coats Fixed selling and administrative costs Net profit (loss) per case $ 251 162 40 49 20 $ (20) 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 reyenues and costs in 9000) Status Quo Alternative 290,000 Units 310,000 Units Difference Sales revenue Variable costs: Manufacturing Selling and administrative Contribution margin Fixed costs Operating profit

Answer 1

Solution:

(All revenues and costs in 000's)

	Status Quo 290,000 units	Alternative 310,000 units	Difference
Sales revenue	116870	121890	5020	Higher
Variable costs:
Manufacturing	46980	50220	3240	Higher
Selling and administrative	22910	23890	980	Higher
Contribution margin	46980	47780	800	Higher
Fixed costs	17400	17400	0	Higher
Operating profit	29580	30380	800	Higher

9 _ Copy of HomeworkLib2 - Microsoft Excel (Product Activation Failed) x File Home Insert Formulas Page Layout Data Review View X % Cut AutoSum Calibri 11 A A z Wrap Text General Normal Bad Good la Copy Fill Paste B 1 U- - Merge & Center GP, % Calculation Conditional Format as Neutral Formatting Table Check Cell Insert Delete Format Format Painter 2 Clear Sort & Find & Filter - Select Editing Font Number Styles Cells Clipboard H27 Alignment fic =((C26*C27)+(C35*D35))/1000 D E A B С F G H J K L M N 0 P Q R S T 22 23 24 25 Capacit to produce 3,70,000 Producing and selling Selling price 2,90,000 403 Status Quo 290,000 units 116870 Alternative 310,000 units 121890 Difference 5020 Higher 162 46980 40 Variable manufacturing costs Fixed manufacturing costs Variable selling and administrative costs Fixed selling and administrative costs Total costs Sales revenue Variable costs: Manufacturing Selling and administrative Contribution margin Fixed costs Operating profit 79 20 301 22910 46980 17400 29580 50220 23890 47780 17400 30380 3240 Higher 980 Higher 800 Higher 0 Higher 800 Higher Special ordero Variable selling and administrative 20,000 251 49 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 251 162 Selling price per case Variable manufaccturing costs Fixed manufacturing costs Variableselling and administrative costs Fixed selling and administrative costs Net profit (loss) per case 40 49 20 -20 51 52 Sheet184 Sheet185 Sheet186 Sheet187 Sheet188 Sheet189 Sheet190 Sheet191 Sheet192 Sheet193 Sheet194 III Ready PO 100% Type here to search O DI D 23% » ENG 03:15 26-09-2020

9 _ Copy of HomeworkLib2 - Microsoft Excel (Product Activation Failed) X File Home Insert Formulas Page Layout Data Review View X % Cut AutoSum Calibri 11 A A z Wrap Text General Normal Bad Good la Copy Fill Paste B 1 U- *Merge & Center Calculation Conditional Format as Neutral Formatting Table Check Cell Insert Delete Format Format Painter 2 Clear Sort & Find & Filter - Select Editing Clipboard Font Alignment Number Styles Cells G42 f А B C D E F G H 1 J K L 22 23 24 25 Capacit to produce 370000 Producing and selling Selling price 290000 403 Alternative 310,000 units =((C26* C27)+(C35*D35))/1000 Difference =H27-G27 Higher 162 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 40 Status Quo 290,000 units Sales revenue =C27* C26/1000 Variable costs: Manufacturing =(C29*C26)/1000 Selling and administrative =C31*C26/1000 Contribution margin =G27-G29-G30 Fixed costs =(C30+C32)*C26/1000 Operating profit =G31-G32 Variable manufacturing costs Fixed manufacturing costs Variable selling and administrative costs Fixed selling and administrative costs Total costs 79 20 301 =(C26+C35)*C39/1000 =((C26*C31)+(C35*C36))/1000 =H27-H29-H30 =G32 =H31-H32 =H29-629 =H30-G30 =H31-G31 =H32-G32 =H33-G33 Higher Higher Higher Higher Higher 251 Special ordero Variable selling and administrative 20000 49 251 162 40 Selling price per case Variable manufaccturing costs Fixed manufacturing costs Variableselling and administrative costs Fixed selling and administrative costs Net profit (loss) per case 41 49 20 -20 42 43 44 45 46 47 48 49 50 51 52 KI Sheet184 Sheet185 Sheet186 Sheet187 Sheet188 Sheet189 Sheet190 Sheet191 Sheet192 Sheet193 Sheet194 Ready PO 100% U 03:15 Type here to search о DI . 24% » ENG 26-09-2020