Decision on Accepting Additional Business

Glide Ride Tire and Rubber Company has capacity to produce 145,000 tires. Glide Ride presently produces and sells 111,000 tires for the North American market at a price of $107.00 per tire. Glide Ride is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 17,000 tires for $90.05 per tire. Glide Ride's accounting system indicates that the total cost per tire is as follows:

Direct materials	$41
Direct labor	15
Factory overhead (70% variable)	25
Selling and administrative expenses (30% variable)	21
Total	$102

Glide Ride 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 $6.00 per tire. In addition, Euro has made the order conditional on receiving European safety certification. Glide Ride estimates that this certification would cost $96,900.

Glide Ride Tire and Rubber Company Proposal to Sell to Euro Motors Differential revenue from accepting special offer Differential costs from accepting special offer: (Enter per unit cost amounts as positive values; enter the per unit cost savings as a negative value Direct materials Direct labor Variable factory overhead Variable selling and administra Less avoided sales connission Additional shipping costs Variable special offer product Incremental certification costs Total differential costs Differential income fron accep Per Unit 90.05 41 15 17.5 6.30 Total 1530850 96900