Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
expand_more
expand_more
format_list_bulleted
Question
Chapter 25, Problem 15E
a)
To determine
Prepare the differential analysis of Company TTR on July 31, to decide whether to reject or accept the proposal.
b)
To determine
Ascertain the minimum price per unit which would be financially accepted by Company TTR.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
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…
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:
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…
.......
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…
Chapter 25 Solutions
Financial And Managerial 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 a 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 method differ from...Ch. 25 - Prob. 10DQ
Ch. 25 - Lease or sell Plymouth Company owns equipment with...Ch. 25 - Prob. 2BECh. 25 - Make or buy A company manufactures various-sized...Ch. 25 - Replace equipment A machine with a book value of...Ch. 25 - Process or sell Product J19 is produced for 11 per...Ch. 25 - Prob. 6BECh. 25 - Product cost markup percentage Green Thumb Garden...Ch. 25 - Prob. 8BECh. 25 - Differential analysis for a lease or sell decision...Ch. 25 - Prob. 2ECh. 25 - Differential analysis for a discontinued product A...Ch. 25 - Differential analysis for a discontinued product...Ch. 25 - Prob. 5ECh. 25 - Decision to discontinue a product On the basis of...Ch. 25 - Make-or-buy decision Somerset 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...Ch. 25 - Sell or process further Calgary Lumber Company...Ch. 25 - Sell or process further Dakota Coffee Company...Ch. 25 - Decision on accepting additional business...Ch. 25 - Accepting business at a special price Box Elder...Ch. 25 - Prob. 15ECh. 25 - Product cost method of product pricing La Femme...Ch. 25 - Product cost method of product costing Smart...Ch. 25 - Target costing Toyota Motor Corporation (TM) uses...Ch. 25 - Target costing Instant Image Inc. manufactures...Ch. 25 - Product decisions under bottlenecked operations...Ch. 25 - Prob. 21ECh. 25 - Total cost method of product pricing Based on the...Ch. 25 - Variable cost method 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. 4PACh. 25 - Prob. 5PACh. 25 - Product pricing using the cost-plus approach...Ch. 25 - Differential analysis involving opportunity costs...Ch. 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. 5PBCh. 25 - Product pricing using the cost-plus approach...Ch. 25 - Analyze Pacific Airways Pacific Airways provides...Ch. 25 - Service yield pricing and differential equations...Ch. 25 - Prob. 3MADCh. 25 - Service yield pricing and differential analysis...Ch. 25 - Aaron McKinney is a cost accountant for Majik...Ch. 25 - Prob. 3TIFCh. 25 - Prob. 4TIFCh. 25 - Accepting service business at a special price If...Ch. 25 - Prob. 6TIFCh. 25 - In differential cost analysis, which one of the...Ch. 25 - Prob. 2CMACh. 25 - Prob. 3CMACh. 25 - Oakes Inc. manufactured 40,000 gallons of Mononate...
Knowledge Booster
Similar questions
- 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 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_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_forward
- 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…arrow_forward6. 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: Cost Driver Dollar Amount per Tire Direct materials $75 Direct labor 20 Factory overhead (70% variable) 30 Selling and admin 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 order conditional on…arrow_forwardTalladega 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
- Talladega 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_forwardLeo Consulting enters into a contract with Highgate University to restructure Highgate's processes for purchasing goods from suppliers. The contract states that Leo will earn a fixed fee of $22,000 and earn an additional $4,000 if Highgate achieves $40,000 of cost savings. Leo estimates a 60% chance that Highgate will achieve $40,000 of cost savings. Assuming that Leo determines the transaction price as the expected value of expected consideration, what transaction price will Leo estimate for this contract?arrow_forwardLowwater Sailmakers manufactures sails for sailboats. The company has the capacity to produce 25,000 sails per year, but is currently producing and selling 20,.000 sails per year, The following information relates to current production. If a special sales order is accepted for 2,000 sails at a price of $87 per unit, and fixed costs increase by $20,000, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) Sale price per unit $150 Variable costs unit: per Manufacturing Marketing and administrative $60 $20 Total fixed costs: Manufacturing Marketing and administrative S600,000 $200 000 Increase by S14,000 Decrease by S4,000 ) Decrease by S14,000 ) Decrease by S6,000 () Increase by S6,000 ()arrow_forward
- Adams Furniture receives a special order for 10 sofas for a special price of $6,000. The direct materials and direct labor for each sofa are $140. In addition, supervision and other fixed overhead costs average $160 per sofa. a1. What is the impact on operating income from accepting the special order? a2. Based solely on a short-term financial analysis, should Adams accept the special order? b1. If Adams is currently operating at full capacity, what would be the opportunity cost per unit for lost sales to regular customers if the special sales order is accepted and the selling price per unit on regular sales equals $900? b2. Based solely on a short-term financial analysis, should Adams accept the special order if it is currently operating at full capacity? Complete this question by entering your answers in the tabs below. Req A1 Show Transcribed Text Req A1 What is the impact on operating income from accepting the special order? Operating income would per sofa. Yes ONO Reg A2 Req A1…arrow_forward4 Lowwater Sailmakers manufactures sails for sailboats. The company has the capacity to produce 25,000 sails per year, but is currently producing and selling 20,000 sails per year. The following information relates to current production. If a special sales order is accepted for 4,500 sails at a price of $120 per unit, and fixed costs remain unchanged, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) Sale price per unit $150 Variable costs per unit: Manufacturing Marketing and administratrve $60 $20 Total fixed costs: Manufacturing Marketing and administrative $600,000 S200,000 Increase by $160,000 ) Increase by $150,000 ) Increase by $140,000 Increase by S170,000 ) Increase by S180,000 ()arrow_forwardThe Cool Can Company manufactures drink koozies and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $7.00. The new customer is geographically separated from Cool Can's other customers, and existing sales will not be affected. Cool Can normally produces 95,000 units but plans to produce and sell only 65,000 in the coming year. The normal sale price is $16 per unit. Unit cost information is as follows: Direct materials Direct labor Variable overhead Fixed overhead. Total In addition, assume that the new customer also wants to have its company logo affixed to each koozie using a label. Cool Can would have to purchase a special logo labeling machine that will cost $12,000 The machine will be able to label the 15,000 units and then it will be scrapped (with no further value). No other fixed overhead activities will be incurred. In addition, each special logo requires additional direct materials of $0.20 $3.10 2.50 1.15 1.00 $8.55…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
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub