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Brightstone Tire and Rubber Company has capacity to produce-(Answered)

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Brightstone Tire and Rubber Company has capacity to produce 177,500 tires. Brightstone presently produces and sells 130,500 tires for the North American market at a price of $178 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 19,600 tires for $116.62 per tire. Brightstone?s accounting system indicates that the total cost per tire is as follows:

Direct materials

$54

Direct labor

24

Factory overhead (62% variable)

24

Selling and administrative expenses (44% variable)

25

Total

$127.00

Brightstone 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 $7.65 per tire. In addition, Euro has made the order conditional on receiving European safety certification. Brightstone estimates that this certification would cost $165,424.

Required:

A.

Prepare a differential analysis dated January 21 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required.

B.

Determine whether the company should reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors

C.

What is the minimum price per unit that would be financially acceptable to Brightstone?

If you could please keep it in this format and show me how you got each number Thank You:


Brightstone Tire and Rubber Company has capacity to produce 177,500 tires. Brightstone presently

 

produces and sells 130,500 tires for the North American market at a price of $178 per tire. Brightstone

 

is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to

 

buy 19,600 tires for $116.62 per tire. Brightstone?s accounting system indicates that the total cost per

 

tire is as follows:

 


 

Direct materials

 


 

$54

 


 

Direct labor

 


 

24

 


 

Factory overhead (62% variable)

 


 

24

 


 

Selling and administrative expenses (44% variable)

 


 

25

 


 

Total

 


 

$127.00

 


 

Brightstone 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 $7.65 per tire. In addition, Euro has made the order

 

conditional on receiving European safety certification. Brightstone estimates that this certification

 

would cost $165,424.

 

Required:

 

A. Prepare a differential analysis dated January 21 on whether to reject (Alternative 1) or accept

 

(Alternative 2) the special order from Euro Motors. Refer to the lists of Labels and Amount

 

Descriptions for the exact wording of the answer choices for text entries. For those boxes in which

 

you must enter subtracted or negative numbers use a minus sign. If there is no amount or an

 

amount is zero, enter "0". A colon (:) will automatically appear if required.

 

B. Determine whether the company should reject (Alternative 1) or accept (Alternative 2) the special

 

order from Euro Motors

 

C. What is the minimum price per unit that would be financially acceptable to Brightstone?

 


 

If you could please keep it in this format and show me how you got each

 

number Thank You:

 


 

 

Paper#9210143 | Written in 27-Jul-2016

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