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 zero "0". If required, round interim calculations to two decimal places.
Brightstone Tire and Rubber Company has capacity to produce 272,000 tires. Brightstone presently produces and sells 208,000 tires for the North American market at a price of $111 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 32,000 tires for $91.65 per tire. Brightstone's accounting system indicates that the total cost per tire is as follows:
| Direct materials | $42 |
| Direct labor | 16 |
| Factory |
26 |
| Selling and administrative expenses (40% variable) | 22 |
| Total | $106 |
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 $6 per tire. In addition, Euro has made the order conditional on receiving European safety certification. Brightstone estimates that this certification would cost $188,800.
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 zero "0". If required, round interim calculations to two decimal places.
| Differential Analysis | |||
| Reject Order (Alt. 1) or Accept Order (Alt. 2) | |||
| January 21 | |||
| Reject Order (Alternative 1) |
Accept Order (Alternative 2) |
Differential Effect on Income (Alternative 2) |
|
| Revenues | $fill in the blank a994bdf9cfc9f94_1 | $fill in the blank a994bdf9cfc9f94_2 | $fill in the blank a994bdf9cfc9f94_3 |
| Costs: | |||
| Direct materials | fill in the blank a994bdf9cfc9f94_4 | fill in the blank a994bdf9cfc9f94_5 | fill in the blank a994bdf9cfc9f94_6 |
| Direct labor | fill in the blank a994bdf9cfc9f94_7 | fill in the blank a994bdf9cfc9f94_8 | fill in the blank a994bdf9cfc9f94_9 |
| Variable factory overhead | fill in the blank a994bdf9cfc9f94_10 | fill in the blank a994bdf9cfc9f94_11 | fill in the blank a994bdf9cfc9f94_12 |
| Variable selling and admin. expenses | fill in the blank a994bdf9cfc9f94_13 | fill in the blank a994bdf9cfc9f94_14 | fill in the blank a994bdf9cfc9f94_15 |
| Shipping costs | fill in the blank a994bdf9cfc9f94_16 | fill in the blank a994bdf9cfc9f94_17 | fill in the blank a994bdf9cfc9f94_18 |
| Certification costs | fill in the blank a994bdf9cfc9f94_19 | fill in the blank a994bdf9cfc9f94_20 | fill in the blank a994bdf9cfc9f94_21 |
| Income (Loss) | $fill in the blank a994bdf9cfc9f94_22 | $fill in the blank a994bdf9cfc9f94_23 | $fill in the blank a994bdf9cfc9f94_24 |
Determine whether to reject (Alternative 1) or accept (Alternative 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.
$fill in the blank 60f4a2036fbf011_2per unit
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