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Decision on Accepting Additional Business Rubber Meets the Road Company has capacity to produce 187,000 tires. Rubber Meets the Road presently produces and sells 143,000
Decision on Accepting Additional Business Rubber Meets the Road Company has capacity to produce 187,000 tires. Rubber Meets the Road presently produces and sells 143,000 tires for the North American market at a price of $94.00 per tire. Rubber Meets the Road is evaluating a special order from a South American automobile company, Cruising Motors. Cruising Motors is offering to buy 22,000 tires for $79.30 per tire. Rubber Meets the Road's accounting system indicates that the total cost per tire is as follows: Direct materials $36 Direct labor 13 Factory overhead (70% variable) 22 Selling and administrative expenses (40% variable) 19 Total $90 Rubber Meets the Road pays a sales 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 $5.00 per tire. In addition, Cruising has made the order conditional on Rubber Meets the Road receiving a Brazilian safety certification. Cruising estimates that this certification would cost Rubber Meets the Road $110,000. a. Prepare a differential analysis report for the proposed sale to Cruising Motors. Round your answers to the nearest cent. Rubber Meets the Road Company Sell to Cruising Motors Differential Analysis Report Sell to Cruising Motors Differential Analysis Report Per Unit Total 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). Total differential costs b. What is the minimum price per unit that would be financially acceptable to Rubber Meets the Road? Round your answer to the nearest cent. per unit
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