Accounting
27th Edition
ISBN: 9781285149165
Author: WARREN
Publisher: CENGAGE C
expand_more
expand_more
format_list_bulleted
Question
Chapter 25, Problem 25.15EX
a)
To determine
Differential Analysis: Differential analysis refers to the analysis of differential revenue that could be gained or differential cost that could be incurred from the available alternative options of business.
To Prepare: The differential analysis of Company BTR on January 21, to decide whether to reject or accept the proposal.
b)
To determine
The minimum price per unit which would be financially accepted by Company BTR.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Decision on Accepting Additional Business
Brightstone Tire and Rubber Company has capacity to produce 247,000 tires. Brightstone presently produces and sells 189,000 tires for the North American market at a price of $93 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 29,000 tires for $78.15 per tire. Brightstone's accounting system indicates that the total cost per tire is as follows:
Direct materials
$35
Direct labor
13
Factory overhead (70% variable)
21
Selling and administrative expenses (40% variable)
19
Total
$88
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…
Decision on Accepting Additional Business
Brightstone Tire and Rubber Company has capacity to produce 153,000 tires. Brightstone presently produces and sells 117,000 tires for the North American market at a price of $94 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 18,000 tires for $78.5 per tire. Brightstone's accounting system indicates that the total cost per tire is as follows:
Direct materials
$36
Direct labor
13
Factory overhead (60% variable)
22
Selling and administrative expenses (40% variable)
19
Total
$90
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…
Decision on Accepting Additional Business
Brightstone Tire and Rubber Company has capacity to produce 238,000 tires. Brightstone presently produces and sells 182,000 tires for the North American market at a price of $89 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 28,000 tires for $75.15 per tire. Brightstone's accounting system indicates that the total cost per tire is as follows:
Direct materials
$34
Direct labor
12
Factory overhead (70% variable)
20
Selling and administrative expenses (40% variable)
18
Total
$84
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…
Chapter 25 Solutions
Accounting
Ch. 25 - Explain the meaning of (a) differential revenue,...Ch. 25 - A company could sell a building for 250,000 or...Ch. 25 - A chemical company has commodity-grade and...Ch. 25 - A company accepts incremental business at a...Ch. 25 - A company fabricates a component at a cost of...Ch. 25 - Prob. 6DQCh. 25 - In the long run, the normal selling price must be...Ch. 25 - Although the cost-plus approach to product pricing...Ch. 25 - How does the target cost concept differ from...Ch. 25 - Prob. 10DQ
Ch. 25 - Under what conditions might a company use...Ch. 25 - Lease or sell Duncan Company owns a machine with a...Ch. 25 - Lease or sell Timberlake Company owns equipment...Ch. 25 - Prob. 25.2APECh. 25 - Discontinue a segment Product B has revenue of...Ch. 25 - Make or buy A restaurant bakes its own bread for a...Ch. 25 - Make or buy A company manufactures various sized...Ch. 25 - Replace equipment A machine with a book value of...Ch. 25 - Replace equipment A machine with a book value of...Ch. 25 - Prob. 25.5APECh. 25 - Process or sell Product D is produced for 24 per...Ch. 25 - Accept business at special price Product AA is...Ch. 25 - Prob. 25.6BPECh. 25 - Product cost markup percentage Light force Inc....Ch. 25 - Product cost markup percentage Green Thumb Garden...Ch. 25 - Bottleneck profit Product A has a unit...Ch. 25 - Prob. 25.8BPECh. 25 - Activity-based costing Mainline Marine Company has...Ch. 25 - Activity-based costing Casual Cuts Inc. has total...Ch. 25 - Differential analysis for a lease-or-sell decision...Ch. 25 - Prob. 25.2EXCh. 25 - Prob. 25.3EXCh. 25 - Differential analysis for a discontinued product...Ch. 25 - Segment analysis for a service company Charles...Ch. 25 - Decision to discontinue a product On the basis of...Ch. 25 - Make or buy decision Diamond Computer Company has...Ch. 25 - Make-or-buy decision for a service company The...Ch. 25 - Machine replacement decision A company is...Ch. 25 - Differential analysis for machine replacement Kim...Ch. 25 - Sell or process further Big Fork Lumber Company...Ch. 25 - Prob. 25.12EXCh. 25 - Decision on accepting additional business...Ch. 25 - Accepting business at a special price Portable...Ch. 25 - Prob. 25.15EXCh. 25 - Accepting business at a special price for a...Ch. 25 - Product cost concept of product pricing La Femme...Ch. 25 - Product cost concept of product costing Smart...Ch. 25 - Target costing Toyota Motor Corporation uses...Ch. 25 - Target costing Instant Image Inc. manufactures...Ch. 25 - Product decisions under bottlenecked operations...Ch. 25 - Product decisions under bottlenecked operations...Ch. 25 - Activity-based costing CardioTrainer Equipment...Ch. 25 - Activity-based costing Zeus Industries...Ch. 25 - Activity rates and product costs using...Ch. 25 - Total cost concept of product pricing Based on the...Ch. 25 - Variable cost concept of product pricing Based on...Ch. 25 - Differential analysis involving opportunity costs...Ch. 25 - Differential analysis for machine replacement...Ch. 25 - Differential analysis for sales promotion proposal...Ch. 25 - Prob. 25.4APRCh. 25 - Prob. 25.5APRCh. 25 - Prob. 25.6APRCh. 25 - Activity-based costing Pure Cane Sugar Company...Ch. 25 - Prob. 25.1BPRCh. 25 - Differential analysis for machine replacement...Ch. 25 - Differential analysis for sales promotion proposal...Ch. 25 - Differential analysis for further processing The...Ch. 25 - Prob. 25.5BPRCh. 25 - Product pricing and profit analysis with...Ch. 25 - Activity-based costing Southeastern Paper Company...Ch. 25 - Ethics in Action Aaron McKinney is a cost...Ch. 25 - Communication The following conversation took...Ch. 25 - Decision on accepting additional business A...Ch. 25 - Accept business at a special price for a service...Ch. 25 - Identifying product cost distortion Peachtree...
Knowledge Booster
Similar questions
- Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is 30. The cost of holding one unit of inventory for one year is 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the economic order quantity. 2. Compute the ordering, carrying, and total costs for the EOQ. 3. How much money does using the EOQ policy save the company over the policy of purchasing 4,000 plastic housing units per order?arrow_forwardDeuce Sporting Goods manufactures a high-end model tennis racket. The company’s forecasted income statement for the year, before any special orders, is as follows: Fixed costs included in the forecasted income statement are $400,000 in manufacturing cost of goods sold and $200,000 in selling expenses. A new client placed a special order with Deuce, offering to buy 1,000 tennis rackets for $100.00 each. The company will incur no additional selling expenses if it accepts the special order. Assuming that Deuce has sufficient capacity to manufacture 1,000 more tennis rackets, by what amount would differential income increase (decrease) as a result of accepting the special order? (Hint: First compute the variable cost per unit relevant to this decision.)arrow_forwardDecision on Accepting Additional Business Brightstone Tire and Rubber Company has capacity to produce 179,000 tires. Brightstone presently produces and sells 137,000 tires for the North American market at a price of $112 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 21,000 tires for $96 per tire. Brightstone's accounting system indicates that the total cost per tire is as follows: Direct materials $43 Direct labor 16 Factory overhead (70% variable) 26 Selling and administrative expenses (40% variable) 22 Total $107 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…arrow_forward
- Decision on Accepting Additional Business Talladega Tire and Rubber Company has capacity to produce 500,000 tires. Talladega presently produces and sells 400,000 tires for the North American market at a price of $200 per tire. Talladega is evaluating a special order from a European automobile company, Autobahn Motors. Autobahn is offering to buy 100,000 tires for $150 per tire. Talladega's accounting system indicates that the total cost per tire is as follows: Direct materials Direct labor Factory overhead (70% variable) Selling and administrative expenses (60% variable) Total Talladega pays a selling commission equal to 3% 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 $3 per tire. In addition, Autobahn has made the order conditional on…arrow_forwardDecision on Accepting Additional Business Talladega Tire and Rubber Company has capacity to produce 500,000 tires. Talladega presently produces and sells 400,000 tires for the North American market at a price of $200 per tire. Talladega is evaluating a special order from a European automobile company, Autobahn Motors. Autobahn is offering to buy 100,000 tires for $150 per tire. Talladega's accounting system indicates that the total cost per tire is as follows: Line Item DescriptionAmountDirect materials$75Direct labor20Factory overhead (70% variable)30Selling and administrative expenses (60% variable)18Total$143 Talladega pays a selling commission equal to 3% 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 $3 per tire. In addition, Autobahn…arrow_forwardDecision on Accepting Additional Business 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…arrow_forward
- Talladega Tire and Rubber Company has capacity to produce 500,000 tires. Talladega presently produces and sells 400,000 tires for the North American market at a price of $200 per tire. Talladega is evaluating a special order from a European automobile company, Autobahn Motors. Autobahn is offering to buy 100,000 tires for $150 per tire. Talladega's accounting system indicates that the total cost per tire is as follows: Line Item Description Amount Direct materials $75 Direct labor 20 Factory overhead (70% variable) 30 Selling and administrative expenses (60% variable) 18 Total $143 Talladega pays a selling commission equal to 3% 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 $3 per tire. In addition, Autobahn has made the…arrow_forwardDecision on Accepting Additional Business Miramar Tire and Rubber Company has capacity to produce 204,000 tires. Miramar presently produces and sells 156,000 tires for the North American market at a price of $102.00 per tire. Miramar is evaluating a special order from a South American automobile company, Rio Motors. Rio Motors is offering to buy 24,000 tires for $82.40 per tire. Miramar’s accounting system indicates that the total cost per tire is as follows: Direct materials $39 Direct labor 14 Factory overhead (60% variable) 23 Selling and administrative expenses (30% variable) 20 Total $96 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 $6.00 per tire. In addition, Rio has…arrow_forwardDecision on Accepting Additional Business Miramar Tire and Rubber Company has capacity to produce 264,000 tires. Miramar presently produces and sells 202,000 tires for the North American market at a price of $113.00 per tire. Miramar is evaluating a special order from a South American automobile company, Rio Motors. Rio Motors is offering to buy 31,000 tires for $95.35 per tire. Miramar's accounting system indicates that the total cost per tire is as follows: Direct materials $43 Direct labor 16 Factory overhead (70% variable) 26 Selling and administrative expenses (40% variable) 23 Total $108 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 $6.00 per tire. In addition, Rio has made the order…arrow_forward
- Talladega Tire and Rubber Company has capacity to produce 170,500 tires. Talladega presently produces and sells 133,900 tires for the North American market at a price of $179 per tire. Talladega is evaluating a special order from a European automobile company, Autobahn Motors. Autobahn is offering to buy 19,500 tires for $110.95 per tire. Talladega’s accounting system indicates that the total cost per tire is as follows: Direct materials $54 Direct labor 21 Factory overhead (58% variable) 24 Selling and administrative expenses (40% variable) 28 Total $127 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 $7.56 per tire. In addition, Autobahn has made the order conditional on…arrow_forward....... 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…arrow_forwardTalladega Tire and Rubber Company has capacity to produce 194,000 tires. Talladega presently produces and sells 134,900 tires for the North American market at a price of $180 per tire. Talladega is evaluating a special order from a European automobile company, Autobahn Motors. Autobahn is offering to buy 19,400 tires for $115.60 per tire. Talladega’s accounting system indicates that the total cost per tire is as follows: Direct materials $57 Direct labor 20 Factory overhead (57% variable) 26 Selling and administrative expenses (46% variable) 26 Total $129 Talladega pays a selling commission equal to 4% 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 $7.01 per tire. In addition, Autobahn has made the order conditional on…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Principles of Cost Accounting
Accounting
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning