Instructions Talladega Tire and Rubber Company has capacity to produce 187,000 tires. Talladega presently produces and sells 134,200 tires for the North American market at a price of $176 per tire. Talladega is evaluating a special order from a European automobile company, Autobahn Motors. Autobahn is offering to buy 15,100 tires for $119.66 per tire. Talladega's accounting system indicates that the total cost per tire is as follows: Direct materials $57 Direct labor 23 Factory overhead (58% variable) 27 Selling and administrative expenses (43% variable) 25 Total $132 Talladega pays a selling commission equal to 4% 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 $7.73 per tire. In addition, Autobahn has made the order conditional on receiving European safety certification. Talladega estimates that this certification would cost $127,293. Required: a. Prepare a differential analysis dated July 31 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Autobahn Motors. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "O". A colon (;) will automatically appear if required. b. Determine whether the company should reject (Alternative 1) or accept (Alternative 2) the special order from Autobahn Motors c. What is the minimum price per unit that would be financially acceptable to Talladega? Round your answer to two decimal places. Labels and Amount Descriptions Labels Cash flows from investing activities Costs Amount Descriptions Certification costs Direct labor Direct materials Gain on sale of investments Income (loss) Loss on sale of investments Revenues Shipping costs Variable factory overhead Variable selling and administrative expenses Differential Analysis a. Prepare a differential analysis dated July 31 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Autobahn Motors. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "O". A colon () will automatically appear if required. Differential Analysis Reject (Alternative 1) or Accept (Alternative 2) Order July 31 Differential Effect 1 Reject Order Accept Order on Income 2 (Alternative 1) (Alternative 2) (Alternative 2) 3 4 (Label) 5 6 7 8 9 10 11 Final Questions b. Determine whether the company should reject (Alternative 1) or accept (Alternative 2) the special order from Autobahn Motors. O Accept O The company is indifferent since the result is the same regardless of which alternative is chosen. O Reject c. What is the minimum price per unit that would be financially acceptable to Talladega? Round your answer to two decimal places
