Decision on Accepting Additional Business Miramar Tire and Rubber Company has capacity to produce 196,000 tires. Miramar presently produces and sells 150,000 tires for the North American market at a price of $95.00 per tire. Miramar is evaluating a special order from a South American automobile company, Rio Motors. Rio Motors is offering to buy 23,000 tires for $75.75 per tire. Miramar's accounting system indicates that the total cost per tire is as follows: Direct materials Direct labor Factory overhead (60% variable) $36 13 22 Selling and administrative expenses (30% variable) 19 Total $90 Miramar pays a sales 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 $5.00 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 $115,000. 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 Differential Analysis Report
Decision on Accepting Additional Business Miramar Tire and Rubber Company has capacity to produce 196,000 tires. Miramar presently produces and sells 150,000 tires for the North American market at a price of $95.00 per tire. Miramar is evaluating a special order from a South American automobile company, Rio Motors. Rio Motors is offering to buy 23,000 tires for $75.75 per tire. Miramar's accounting system indicates that the total cost per tire is as follows: Direct materials Direct labor Factory overhead (60% variable) $36 13 22 Selling and administrative expenses (30% variable) 19 Total $90 Miramar pays a sales 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 $5.00 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 $115,000. 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 Differential Analysis Report
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Safety CCra
1. RIO CStimates that this certification would cost Partial THE
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
Differential Analysis Report
Differential revenue from accepting special offer
Differential costs from accepting special offer:
(Enter per unit cost amounts as positive values; enter the per unit cost savings as a negative value).
Direct materials
Direct labor
Variable factory overhead
Variable selling and administrative
Less avoided sales commission
Additional shipping costs
Variable special offer product cost
Incremental certification costs
Total differential costs
Differential income from accepting special order
Feedback
Per Unit Total
$
0000
Transcribed Image Text:.......
Decision on Accepting Additional Business
Miramar Tire and Rubber Company has capacity to produce 196,000 tires. Miramar presently produces and sells 150,000 tires for the North
American market at a price of $95.00 per tire. Miramar is evaluating a special order from a South American automobile company, Rio Motors. Rio
Motors is offering to buy 23,000 tires for $75.75 per tire. Miramar's accounting system indicates that the total cost per tire is as follows:
Direct materials
Direct labor
Factory overhead (60% variable)
$36
13
22
Selling and administrative expenses (30% variable)
19
$90
<
Total
Miramar pays a sales 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 $5.00 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 $115,000.
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
Differential Analysis Report
Per Unit
Total
jpe
1000 F
3 EDGE
peg
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