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 $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:

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

b. Do you agree with the decision to reject the special order?
Yes
No

a) If Alpine accepts  special order, then its profit will increase $1,360,000

b) I don't agree with the decision to reject the special order because the profit will increase without any extra cost.

Explanation:

As current operation (reject special order), the company can make profit = revenue - fixed cost - variable cost, in which fixed cost is applied to full capacity (410,000 units), while revenue and variable cost apply for current producing and selling only ($330,000 units).

Profit = $399*330,000 - ($164+$78)*330,000 - ($40+$21)*410,000

= $26,800,000

If the company accept the special order, the new profit = current profit + (sales - variable cost) x number unit of special order

= $26,880,000 + ($250 - $164 - $52)*40,000

= $28,160,000

So the increase = profit before special order - profit with special order = $28,160,000 - $26,800,000 = $1,360,000

the correct answer is economics is a game without winners or losers.

unlike sports or games economic is a game without losers or winner rather it is a game where everyone wins. parties of business doing businesses exchange money with each other and hence exchange is done on the basis of goods. one party takes the goods and other sales it so there is winner on both sides. each party values more highly the good it gets than the good it gives up. both sides exchange only because both intend to increase their value. so there is no concept of lose or win.

answer; ///after donning a gown, mask and eyewear;