Brightstone Tire and Rubber Company has capacity to produce 194,000 tires. Brigh

Question

Brightstone Tire and Rubber Company has capacity to produce 194,000 tires. Brightstone presently produces and sells 134,900 tires for the North American market at a price of $180 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 19,400 tires for $115.60 per tire. Brightstone’s accounting system indicates that the total cost per tire is as follows:

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 $7.01 per tire. In addition, Euro has made the order conditional on receiving European safety certification. Brightstone estimates that this certification would cost $162,184.

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

ONLY NEED THE HIGHLTED PARTS I GOT EVERYTHING ELSE DONE

THANKS

Direct materials $57 Direct labor 20 Factory overhead (57% variable) 26 Selling and administrative expenses (46% variable) 26 Total $129.00 Score: 129/143 Differential Analysis Reject Order (Alternative 1) or Accept Order (Alternative 2) January 21 Differential Effect Reject Order Accept Order on Income Alternative 1) (Alternative 2) (Alternative 2) 0.00$2,242,640.00 $2,242,640.00 3 Revenues 4 Costs: 5 Direct materials 6 Direct labor 7 Variable factory overhead 8 Variable selling and administrative expenses 9 Shipping costs 10 Certification costs 11 Income (Loss) .00 1105,800.00)1.105,800.00) 88,000.00) 287,508.00) (60,551.00) (135,994.00) (162,184.00) $70,810.00 0.00 (388,000.00) 287,508.00) 0.00 (228,338.00) 135,994.00) 162,184.00) $70,810.00 0.00 0.00 0.00

Explanation / Answer

It is stated in question that ,there will be no selling commission ,so variable selling expense = 0

"However, this special order would not have a sales commission."

Talking about normal sales(not special offer) :

The total variable portion in selling and administration expense = 26 *.46 = 11.96

Out of which (180 * .04) = $ 7.2sales commission

so othe variable cost = 11.96 - 7.2 = $ 4.76

so In case of special offer ,variable selling cost = $ 4.76 (other sales commission) = 4.76 * 19400

                                                                                    = $ 92344

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