Decision on Accepting Additional Business

Talladega Tire and Rubber Company has capacity to produce 500,000 tires. Talladega presently produces and sells 400,000 tires for the North American market at a price of $200 per tire. Talladega is evaluating a special order from a European automobile company, Autobahn Motors. Autobahn is offering to buy 100,000 tires for $150 per tire. Talladega's accounting system indicates that the total cost per tire is as follows:

Direct materials	$75
Direct labor	20
Factory overhead (70% variable)	30
Selling and administrative expenses (60% variable)	18
Total	$143

Talladega pays a selling commission equal to 3% 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 $3 per tire. In addition, Autobahn has made the order conditional on receiving European safety certification. Talladega estimates that this certification would cost $400,000.

a. Prepare a differential analysis dated July 31 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Autobahn Motors. If an amount is zero, enter "0". If required, round interim calculations to two decimal places.

Differential Analysis Reject Order (Alt. 1) or Accept Order (Alt. 2) July 31

	Reject Order (Alternative 1)	Accept Order (Alternative 2)	Differential Effects (Alternative 2)
Revenues	$fill in the blank ebae0cf74005010_1	$fill in the blank ebae0cf74005010_2	$fill in the blank ebae0cf74005010_3
Costs:
Direct materials	fill in the blank ebae0cf74005010_4	fill in the blank ebae0cf74005010_5	fill in the blank ebae0cf74005010_6
Direct labor	fill in the blank ebae0cf74005010_7	fill in the blank ebae0cf74005010_8	fill in the blank ebae0cf74005010_9
Variable factory overhead	fill in the blank ebae0cf74005010_10	fill in the blank ebae0cf74005010_11	fill in the blank ebae0cf74005010_12
Variable selling and admin. expenses	fill in the blank ebae0cf74005010_13	fill in the blank ebae0cf74005010_14	fill in the blank ebae0cf74005010_15
Shipping costs	fill in the blank ebae0cf74005010_16	fill in the blank ebae0cf74005010_17	fill in the blank ebae0cf74005010_18
Certification costs	fill in the blank ebae0cf74005010_19	fill in the blank ebae0cf74005010_20	fill in the blank ebae0cf74005010_21
Profit (Loss)	$fill in the blank ebae0cf74005010_22	$fill in the blank ebae0cf74005010_23	$fill in the blank ebae0cf74005010_24

Feedback

Determine whether to reject (Alternative 1) or accept (Alternative 2) the special order from Autobahn Motors.

Accept the special order reject the special order accept the special order

b. What is the minimum price per unit that would be financially acceptable to Talladega? Round your answer to two decimal places. $fill in the blank 32979b00a04fff1_2 per unit