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Alpine Luggage has a capacity to produce 200,000 suitcases per year. The company is currently producing and selling 80,000 units per year at a selling price of $160 per case. The cost of producing and selling one case follows.

Variable manufacturing costs	$	64
Fixed manufacturing costs		16
Variable selling and administrative costs		32
Fixed selling and administrative costs		8
Total costs	$	120

The company has received a special order for 5,000 suitcases at a price of $100 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 $20 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	$	100
Variable manufacturing costs		64
Fixed manufacturing costs		16
Variable selling and administrative costs		20
Fixed selling and administrative costs		8
Net profit (loss) per case	$	(8	)

Required:

1. What is the impact on profit for the year if Alpine accepts the special order?

	(All revenues and costs in $000)
	Status Quo 80.000 Units	Alternative 85,000 Units	Difference
Sales revenue
Variable costs:
Manufacturing
Selling and administrative
Contribution margin
Fixed costs
Operating Profit

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