Decision on Accepting Additional Business

Rubber Meets the Road Company has capacity to produce 213,000 tires. Rubber Meets the Road presently produces and sells 163,000 tires for the North American market at a price of $115.00 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 25,000 tires for $92.65 per tire. Rubber Meets the Road's accounting system indicates that the total cost per tire is as follows:

Direct materials	$44
Direct labor	16
Factory overhead (60% variable)	26
Selling and administrative expenses (30% variable)	23
Total	$109

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 $6.00 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 $152,500.

Question Content Area

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

	Per Unit	Total
Differential revenue from accepting special offer	$fill in the blank 5fe648009fd000f_1	$fill in the blank 5fe648009fd000f_2
Differential costs from accepting special offer: (Enter per unit cost amounts as positive values; enter the per unit cost savings as a negative value).
Differential revenue from accepting special offerDirect materialsFactory overhead (total)Incremental certification costsSales commissionsDirect materials	$Direct materials
Differential revenue from accepting special offerDirect laborFactory overhead (total)Incremental certification costsSales commissionsDirect labor	Direct labor
Fixed factory overheadTotal factory overheadVariable factory overheadVariable factory overhead	Variable factory overhead
Fixed selling and administrativeVariable selling and administrativeTotal selling and administrativeVariable selling and administrative	Variable selling and administrative
Avoided sales commissionAvoided certification costsSpecial offer product costsFixed overheadAvoided sales commission	Avoided sales commission
Additional shipping costsDirect materialsDirect laborAdded sales commissionAdditional shipping costs	Additional shipping costs
Fixed special offer product costVariable special offer product costVariable special offer product cost	$Variable special offer product cost	$Variable special offer product cost
Incremental certification costsReduced certification costsIncremental certification costs		Incremental certification costs
Total differential costs		$fill in the blank 5fe648009fd000f_20
Differential income from accepting special orderDifferential loss from accepting special orderDifferential income from accepting special order		$Differential income from accepting special order

Question Content Area

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. $fill in the blank 0d489e00fffaf9e_1 per unit