Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Decision on Accepting Additional Business Brightstone Tire and Rubber Company has capacity to produce 272,000 tires. Brightstone presently produces and sells 208,000 tires for the

image text in transcribed
image text in transcribed
Decision on Accepting Additional Business Brightstone Tire and Rubber Company has capacity to produce 272,000 tires. Brightstone presently produces and sells 208,000 tires for the North American market at a price of $109 per tire, Brightstone is evaluating a special order from a European automobile company, Euro Motors, Euro is offering to buy 32,000 tires for $90.85 per tire. Brightstone's accounting system indicates that the total cost per tire is as follows: Direct materials Direct labor Factory overhead (70% variable) Selling and administrative expenses (40% variable) Total 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 conditiohal on receiving European safety certification. Brightstone estimates that this certification would cost $185,600. 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 "O". If required, round Interim calculations to two decimal places. Differential Analysis Reject Order (Alt. 1) or Accept Order (Alt. 2) January 21 Reject Accept Differential Order Order (Alternative 1) (Alternative 2) on Income (Alternative 2) Revenues Costs: Direct materials Direct labor Variable factory overhead Variable selling and admin. expenses 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 Accept Differential Order Order Effect (Alternative 1) (Alternative 2) on Income (Alternative 2) Revenues Costs: Direct materials Direct labor Variable factory overhead Variable selling and admin. expenses Shipping costs Certification costs Income (Loss) 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. per unit Previous

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Basic Accounting Concepts Principles And Procedures Volume 2

Authors: Gregory Mostyn, Worthy And James

2nd Edition

0991423119, 9780991423118

More Books

Students also viewed these Accounting questions