Alpine Luggage has the 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 $399 per case. The cost of producing and selling one case follows:
Variable manufacturing costs $ 164
Fixed manufacturing costs 40
Variable selling and administrative costs 78
Fixed selling and administrative costs 21
Total costs $ 303
The company has received a special order for 40,000 suitcases at a price of $250 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 $52 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 $ 250
Variable manufacturing costs 164
Fixed manufacturing costs 40
Variable selling and administrative costs 52
Fixed selling and administrative costs 21
Net profit (loss) per case $ (27 )
Required:
What is the impact on profit for the year if Alpine accepts the special order?