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Please help me to figure it out! Thanks! Decision on Accepting Additional Business Miramar Tire and Rubber Company has capacity to produce 119,000 tires. Miramar
Please help me to figure it out! Thanks!
Decision on Accepting Additional Business Miramar Tire and Rubber Company has capacity to produce 119,000 tires. Miramar presently produces and sells 91,000 tires for the North American market at a price of $99.00 per tire. Miramar is evaluating a special order from a South American automobile company, Ria Motors. Rio Motors is offering to buy 11,000 tires for $83.25 per tire. Miramar's accounting system indicates that the total cost per tire is as folows: Direct materials Direct labor Factory overhead (70% variable) Selling and administrative expenses (30% variable) Total 538 23 20 $95 Miramar pa s a sales commiss on equal to 5% of t e seling price on North American arders, whichis n uded in the variable portion of the selling and adm?n strative expenses. However, this special order would not havea sales comm saan. If the order was accepted, the tires would be shipped overseas for an additional shipping cost of $5.00 per tire. In addition, Rio has made the order conditional on Miramar Tire and Rubber Company receiving a Brazilian safety certification. Rio estimates that this certification would cost Miramar Tire $72,800 a. Prepare a differential analysis report for the proposed sale to Rio Motors, Round your answers to the nearest cent. Miramar Tire And Rubber Company Sell to Rio Motors Per Unit Total 03251165.500 Differential revenue from accepting spedial offer Differential costs from accepting special affer: (Enter per unit cost aounts as positive values; enter the per unit cost savings as a negative value), Direct materials Direct labor Variable factory overhead 16.1 Less avoided sales commission Additional shipping costs Variable special offer product cost 1.95 7415 1038,100Step by Step Solution
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