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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: $ 158 Variable manufacturing costs Fixed manufacturing costs Variable selling and administrative costs Fixed selling and administrative costs Total costs 38 82 20 $ 298 The company has received a special order for 40,000 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: $ 251 158 Selling price per case Variable manufacturing costs Fixed manufacturing costs Variable selling and administrative costs Fixed selling and administrative costs Net profit (loss) per case 49 20 $ (14) 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 $000) Status Quo Alternative 290,000 Units 330,000 Units Difference Sales revenue Variable costs: Manufacturing Selling and administrative Contribution margin Fixed costs Operating profit b. Do you agree with the decision to reject the special order? Yes No

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