Decision on Accepting Additional Business Down Home Jeans Co. has an annual plant capacity of 65,500 units, and current production is 45,300 units. Monthly fixed costs are $40,900, and variable costs are $25 per unit. The present selling price is $35 per unit. On November 12 of the current year, the company received an offer from Fields Company for 15,400 units of the product at $26 each. Fields Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Down Home Jeans Co. a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Fields order. If an amount is zero, enter zero "o". 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) November 12 Differential Reject Accept Order (Alteative 1) (Alternative 2) (Alternative 2) > Order Effect on Income Revenues Costs: Variable manufacturing costs Income (Loss) b. Having unused capacity available is to this decision. The differential revenue is than the differential cost. Thus, accepting this additional business will result in a net c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places. Decision on Accepting Additional Business Brightstone Tire and Rubber Company has capacity to produce 238,000 tires. Brightstone presently produces and sells 182,000 tires for the North American market at a price of $110 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 28,000 tires for $92.2 per tire. Brightstone's accounting system indicates that the total cost per tire is as follows: Direct materials $42 Direct labor 15 Factory overhead (70% variable) 25 Selling and administrative expenses (40% variable) 22 Total $104 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 $162,400. 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 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 incel Decl Tau 25 Factory overhead (70% variable) Selling and administrative expenses (40% variable) 22 Total $104 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 $162,400. 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 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
