financeBrightstone Tire and Rubber Company has capacity to produce 170,000 tires. Brightstone presently produces and sells 130,000 tires for the North American market at a price of $175 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors, Euro is offering to buy 20,000 tires for$116 per tire. Brightstone's accounting system indicates that the total cost per tire is as follows:
$$
\begin{array}{lr}
\text{Direct materials}&\$56\\
\text{Direct labor}&22\\
\text{Factory overhead (60\\\% variable)}&25\\
\text{Selling and administrative expenses (45\\\% variable)}&\underline{26}\\
\text{Total}&\underline{\$129}\\
\end{array}
$$
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 $7.50 per tire. In addition, Euro has made the order conditional on receiving European safety certification. Brightstone estimates that this certification would cost$165,000.
a. Prepare a differential analysis dated January 21 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors. 1st Edition•ISBN: 9780078953125 (1 more)Carl A. Woloszyk, Grady Kimbrell, Lois Schneider Farese1,600 solutions
6th Edition•ISBN: 9780078692512McGraw-Hill Education3,760 solutions
10th Edition•ISBN: 9781337902571 (1 more)Eugene F. Brigham, Joel Houston777 solutions
6th Edition•ISBN: 9780078692512McGraw-Hill Education3,760 solutions
