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 $115 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 18,000 tires for $97.75 per tire. Brightstone's accounting system indicates that the total cost per tire is as follows:

Direct materials	$44
Direct labor	16
Factory overhead (70% variable)	26
Selling and administrative expenses (40% variable)	23
Total	$109

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 $109,800.

a. Prepare a differential analysis dated January 21 on whether to Reject Order (Alternative 1) or Accept Order (Alternative 2). If an amount is zero, enter zero "0". If required, round interim calculations to two decimal places. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis Reject Order (Alt. 1) or Accept Order (Alt. 2) January 21

	Reject Order (Alternative 1)	Accept Order (Alternative 2)	Differential Effects (Alternative 2)
Revenues	$fill in the blank edb74efb2ff3010_1	$fill in the blank edb74efb2ff3010_2	$fill in the blank edb74efb2ff3010_3
Costs:
Direct materials	fill in the blank edb74efb2ff3010_4	fill in the blank edb74efb2ff3010_5	fill in the blank edb74efb2ff3010_6
Direct labor	fill in the blank edb74efb2ff3010_7	fill in the blank edb74efb2ff3010_8	fill in the blank edb74efb2ff3010_9
Variable factory overhead	fill in the blank edb74efb2ff3010_10	fill in the blank edb74efb2ff3010_11	fill in the blank edb74efb2ff3010_12
Variable selling and admin. expenses	fill in the blank edb74efb2ff3010_13	fill in the blank edb74efb2ff3010_14	fill in the blank edb74efb2ff3010_15
Shipping costs	fill in the blank edb74efb2ff3010_16	fill in the blank edb74efb2ff3010_17	fill in the blank edb74efb2ff3010_18
Certification costs	fill in the blank edb74efb2ff3010_19	fill in the blank edb74efb2ff3010_20	fill in the blank edb74efb2ff3010_21
Profit (loss)	$fill in the blank edb74efb2ff3010_22	$fill in the blank edb74efb2ff3010_23	$fill in the blank edb74efb2ff3010_24

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a. Subtract the additional costs (each unit cost multiplied by 18,000 tires) from the additional revenue ($97.75 multiplied by the number of tires in the offer). The variable selling and administrative expenses are 40% of $23, less 5% of $115 sales commission per unit.

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

Accept the special orderReject the special orderAccept the special order

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 8e364503507506d_2per unit