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Decision on Accepting Additional Business Brightstone Tire and Rubber Company has capacity to produce 162,000 tires. Brightstone presently produces sells 124,000 tires for the North American market at a price of $88 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 19,000 tires for $72.4 per tire. Brightstone's accounting system indicates that the total cost per tire is as follows: Direct materials $33 Direct labar 12 Factory overhead (70% variable) Selling and administrative expenses (30% variable) Total 20 16 $83 Brightstone pays a selling 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 per tire. In addition, Euro has made the order conditional an receiving European safety certification. Brightstane estimates that this certification would cost $89,300. a. Prepare a differential analysis dated January 21 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors. If an amount is zero, enter zera "O". If required, round interim calculations to two decimal places. Differential Analysis Reject Order (Alt. 1) or Accept Order (Alt. 2) January 21 Reject Accept Differential Order Order Effect (Alternative 1) (Alternative 2) on Income (Alternative 2) Revenues Costs Direct materials Direct labor Variable factory overhead Variable selling and admin. expenses Shipping costs Certification costs Income (Lass) Determine whether to reject (Alternative 1) or accept (Altemative 2) the special order from Euro Motors. b. What is the minimum price per unit that would be financially acceptable to Brightstone? Round your answer to two decimal places. $ per unit Sell or Process Further Bunyon Lumber Company incurs a cost of $394 per hundred board feet (hbf) in processing certain "rough-cut" lumber, which it sells for $544 per hbf. An alternative is to produce a "finished cut" at a total processing cost of $530 per hbf, which can be sold for $768 per hbf. Prepare a differential analysis dated August 9 on whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2). For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Sell Rough-Cut (Alt. 1) or Process Further into Finished Cut (Alt. 2) August 9 Process Differential Sell Further into Effect Rough-Cut Finished Cut on Income (Alternative 1) (Alternative 2) (Alternative 2) Revenues, per 100 board ft. Costs, per 100 board ft. Income (Loss), per 100 board ft. Determine whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2)
