Decision on Accepting Additional Business

Brightstone Tire and Rubber Company has capacity to produce $153,000$ tires. Brightstone presently produces and sells $117,000$ tires for the North American market at a price of $$107$ per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy $18,000$ tires for $$85\mathrm{.}65$ per tire. Brightstone's accounting system indicates that the total cost per tire is as follows:

Direct materials $$41$

Direct labor $15$

Factory overhead $(60\%$ variable$)25$

Selling and administrative expenses $(30\%$ variable$)21$

Total $$102$

Brightstone pays a selling commission equal to $5\%$ of the selling price on North American orders, which is included in the variable portion of the selling and administrative expenses. However, this special order would not have a sales commission. If the order was accepted, the tires would be shipped overseas for an additional shipping cost of $$6$ per tire. In addition, Euro has made the order conditional on receiving European safety certification. Brightstone estimates that this certification would cost $$102,600.$

Question Content Area

a$.$ Prepare a differential analysis dated January $21$ on whether to reject $($Alternative $1)$ or accept $($Alternative $2)$ the special order from Euro Motors. If an amount is zero, enter zero $"0".$ If required, round interim calculations to two decimal places.

Differential Analysis

Reject Order $($Alt$.1)$ or Accept Order $($Alt$.2)$

January $21$

Reject

Order

$($Alternative $1)$ Accept

Order

$($Alternative $2)$ Differential

Effect

on Income $($Alternative $2)$

Revenues $fill in the blank $415$a$73034$fa$0$fa$1\_1$

$fill in the blank $415$a$73034$fa$0$fa$1\_2$

$fill in the blank $415$a$73034$fa$0$fa$1\_3$

Costs:

Direct materials fill in the blank $415$a$73034$fa$0$fa$1\_4$

fill in the blank $415$a$73034$fa$0$fa$1\_5$

fill in the blank $415$a$73034$fa$0$fa$1\_6$

Direct labor fill in the blank $415$a$73034$fa$0$fa$1\_7$

fill in the blank $415$a$73034$fa$0$fa$1\_8$

fill in the blank $415$a$73034$fa$0$fa$1\_9$

Variable factory overhead fill in the blank $415$a$73034$fa$0$fa$1\_10$

fill in the blank $415$a$73034$fa$0$fa$1\_11$

fill in the blank $415$a$73034$fa$0$fa$1\_12$

Variable selling and admin. expenses fill in the blank $415$a$73034$fa$0$fa$1\_13$

fill in the blank $415$a$73034$fa$0$fa$1\_14$

fill in the blank $415$a$73034$fa$0$fa$1\_15$

Shipping costs fill in the blank $415$a$73034$fa$0$fa$1\_16$

fill in the blank $415$a$73034$fa$0$fa$1\_17$

fill in the blank $415$a$73034$fa$0$fa$1\_18$

Certification costs fill in the blank $415$a$73034$fa$0$fa$1\_19$

fill in the blank $415$a$73034$fa$0$fa$1\_20$

fill in the blank $415$a$73034$fa$0$fa$1\_21$

Income $($Loss$)$ $fill in the blank $415$a$73034$fa$0$fa$1\_22$

$fill in the blank $415$a$73034$fa$0$fa$1\_23$

$fill in the blank $415$a$73034$fa$0$fa$1\_24$

Question Content Area

Determine whether to reject $($Alternative $1)$ or accept $($Alternative $2)$ the special order from Euro Motors.

b$.$ What is the minimum price per unit that would be financially acceptable to Brightstone? Round your answer to two decimal places.

$fill in the blank e$439$bff$61$fcafa$7\_2$

per unit