Decision on Accepting Additional Business Miramar 1 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 accounting system indicates that the total cost per tire is as follows: Direct materials $43 Direct labor 16 Factory overhead (70% variable) 26 Seling 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. addition, Rio has made the order conditional on Miramar Tire and Rubber Company receiving a Braailan safety certification. Rio estimates that this certification would cost Miramar Tire $186,000. a. Prepare a dfferential 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 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 b. What is the minimum price per unit that would be financially acceptable to Miramar? Round your answer to the nearest cent.
Decision on Accepting Additional Business Miramar 1 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 accounting system indicates that the total cost per tire is as follows: Direct materials $43 Direct labor 16 Factory overhead (70% variable) 26 Seling 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. addition, Rio has made the order conditional on Miramar Tire and Rubber Company receiving a Braailan safety certification. Rio estimates that this certification would cost Miramar Tire $186,000. a. Prepare a dfferential 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 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 b. What is the minimum price per unit that would be financially acceptable to Miramar? Round your answer to the nearest cent.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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ch.12
Transcribed Image Text:Decision 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 conditional on Miramar Tire and Rubber Company receiving a Brazilian safety certification. Rio estimates that this certification would cost Miramar Tire $186,000.
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
Differential revenue from accepting special offer
95.35
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
43
Direct labor
16
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
b. What is the minimum price per unit that would be financially acceptable to Miramar? Round your answer to the nearest cent.
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