Talladega Tire and Rubber Company has capacity to produce 170,000 tires. Talladega presently produces and sells 130,000 tires for the North American market at a price of $108 per tire. Talladega is evaluating a special order from a European automobile company, Autobahn Motors. Autobahn is offering to buy 20,000 tires for $90.1 per tire. Talladega’s accounting system indicates that the total cost per tire is as follows: Direct materials $41 Direct labor 15 Factory overhead (60% variable) 25 Selling and administrative expenses (40% variable) 22 Total $103 Talladega 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, Autobahn has made the order conditional on receiving European safety certification. Talladega estimates that this certification would cost $114,000. a. Prepare a differential analysis dated July 31 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Autobahn Motors. If an amount is zero, enter "0". If required, round interim calculations to two decimal places. Differential Analysis Reject Order (Alt. 1) or Accept Order (Alt. 2) July 31 Reject Order (Alternative 1) Accept Order (Alternative 2) Differential Effect on Income (Alternative 2) Revenues $fill in the blank 61405805cfe6fdb_1 $fill in the blank 61405805cfe6fdb_2 $fill in the blank 61405805cfe6fdb_3 Costs: Direct materials fill in the blank 61405805cfe6fdb_4 fill in the blank 61405805cfe6fdb_5 fill in the blank 61405805cfe6fdb_6 Direct labor fill in the blank 61405805cfe6fdb_7 fill in the blank 61405805cfe6fdb_8 fill in the blank 61405805cfe6fdb_9 Variable factory overhead fill in the blank 61405805cfe6fdb_10 fill in the blank 61405805cfe6fdb_11 fill in the blank 61405805cfe6fdb_12 Variable selling and admin. expenses fill in the blank 61405805cfe6fdb_13 fill in the blank 61405805cfe6fdb_14 fill in the blank 61405805cfe6fdb_15 Shipping costs fill in the blank 61405805cfe6fdb_16 fill in the blank 61405805cfe6fdb_17 fill in the blank 61405805cfe6fdb_18 Certification costs fill in the blank 61405805cfe6fdb_19 fill in the blank 61405805cfe6fdb_20 fill in the blank 61405805cfe6fdb_21 Income (Loss) $fill in the blank 61405805cfe6fdb_22 $fill in the blank 61405805cfe6fdb_23 $fill in the blank 61405805cfe6fdb_24 Determine whether to reject (Alternative 1) or accept (Alternative 2) the special order from Autobahn Motors. b. What is the minimum price per unit that would be financially acceptable to Talladega? Round your answer to two decimal places. $fill in the blank f38f5cfdc054f83_2per unit

Talladega Tire and Rubber Company has capacity to produce 170,000 tires. Talladega presently produces and sells 130,000 tires for the North American market at a price of $108 per tire. Talladega is evaluating a special order from a European automobile company, Autobahn Motors. Autobahn is offering to buy 20,000 tires for $90.1 per tire. Talladega’s accounting system indicates that the total cost per tire is as follows: Direct materials $41 Direct labor 15 Factory overhead (60% variable) 25 Selling and administrative expenses (40% variable) 22 Total $103 Talladega 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, Autobahn has made the order conditional on receiving European safety certification. Talladega estimates that this certification would cost $114,000. a. Prepare a differential analysis dated July 31 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Autobahn Motors. If an amount is zero, enter "0". If required, round interim calculations to two decimal places. Differential Analysis Reject Order (Alt. 1) or Accept Order (Alt. 2) July 31 Reject Order (Alternative 1) Accept Order (Alternative 2) Differential Effect on Income (Alternative 2) Revenues $fill in the blank 61405805cfe6fdb_1 $fill in the blank 61405805cfe6fdb_2 $fill in the blank 61405805cfe6fdb_3 Costs: Direct materials fill in the blank 61405805cfe6fdb_4 fill in the blank 61405805cfe6fdb_5 fill in the blank 61405805cfe6fdb_6 Direct labor fill in the blank 61405805cfe6fdb_7 fill in the blank 61405805cfe6fdb_8 fill in the blank 61405805cfe6fdb_9 Variable factory overhead fill in the blank 61405805cfe6fdb_10 fill in the blank 61405805cfe6fdb_11 fill in the blank 61405805cfe6fdb_12 Variable selling and admin. expenses fill in the blank 61405805cfe6fdb_13 fill in the blank 61405805cfe6fdb_14 fill in the blank 61405805cfe6fdb_15 Shipping costs fill in the blank 61405805cfe6fdb_16 fill in the blank 61405805cfe6fdb_17 fill in the blank 61405805cfe6fdb_18 Certification costs fill in the blank 61405805cfe6fdb_19 fill in the blank 61405805cfe6fdb_20 fill in the blank 61405805cfe6fdb_21 Income (Loss) $fill in the blank 61405805cfe6fdb_22 $fill in the blank 61405805cfe6fdb_23 $fill in the blank 61405805cfe6fdb_24 Determine whether to reject (Alternative 1) or accept (Alternative 2) the special order from Autobahn Motors. b. What is the minimum price per unit that would be financially acceptable to Talladega? Round your answer to two decimal places. $fill in the blank f38f5cfdc054f83_2per unit

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Decision on Accepting Additional Business

Direct materials	$41
Direct labor	15
Factory overhead (60% variable)	25
Selling and administrative expenses (40% variable)	22
Total	$103

Talladega 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, Autobahn has made the order conditional on receiving European safety certification. Talladega estimates that this certification would cost $114,000.

a. Prepare a differential analysis dated July 31 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Autobahn Motors. If an amount is zero, enter "0". If required, round interim calculations to two decimal places.

Differential Analysis
Reject Order (Alt. 1) or Accept Order (Alt. 2)
July 31
	Reject Order (Alternative 1)	Accept Order (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$fill in the blank 61405805cfe6fdb_1	$fill in the blank 61405805cfe6fdb_2	$fill in the blank 61405805cfe6fdb_3
Costs:
Direct materials	fill in the blank 61405805cfe6fdb_4	fill in the blank 61405805cfe6fdb_5	fill in the blank 61405805cfe6fdb_6
Direct labor	fill in the blank 61405805cfe6fdb_7	fill in the blank 61405805cfe6fdb_8	fill in the blank 61405805cfe6fdb_9
Variable factory overhead	fill in the blank 61405805cfe6fdb_10	fill in the blank 61405805cfe6fdb_11	fill in the blank 61405805cfe6fdb_12
Variable selling and admin. expenses	fill in the blank 61405805cfe6fdb_13	fill in the blank 61405805cfe6fdb_14	fill in the blank 61405805cfe6fdb_15
Shipping costs	fill in the blank 61405805cfe6fdb_16	fill in the blank 61405805cfe6fdb_17	fill in the blank 61405805cfe6fdb_18
Certification costs	fill in the blank 61405805cfe6fdb_19	fill in the blank 61405805cfe6fdb_20	fill in the blank 61405805cfe6fdb_21
Income (Loss)	$fill in the blank 61405805cfe6fdb_22	$fill in the blank 61405805cfe6fdb_23	$fill in the blank 61405805cfe6fdb_24

Determine whether to reject (Alternative 1) or accept (Alternative 2) the special order from Autobahn Motors.

b. What is the minimum price per unit that would be financially acceptable to Talladega? Round your answer to two decimal places.
$fill in the blank f38f5cfdc054f83_2per unit

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