Rubber Meets the Road Company has capacity to produce 250,000 tires. Rubber Meets the Road presently produces and sells 100,000 tires for the North American market at a price of $20 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 20,000 tires for $10 per tire. Rubber Meets the Road’s accounting system indicates that the total cost per tire is as follows:

Direct materials ...................................................................$ 5.00
Direct labor .............................................................................2.50
Factory overhead (45% variable) ..........................................2.00
Selling and administrative expenses (30% variable) ...........1.50
Total ......................................................................................$11.00

Rubber Meets the Road pays a sales commission equal to 2% 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 $0.75 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 $10,000.

a. Prepare a differential analysis report for the proposed sale to Cruising Motors.

b. What is the minimum price per unit that would be financially acceptable to Rubber Meets the Road?