Question

Brightstone Tire and Rubber Company has capacity to produce 176,500 tires. Brightstone presently produces and sells 131,600 tires for the North American market at a price of $190 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 15,100 tires for $115.30 per tire. Brightstone’s accounting system indicates that the total cost per tire is as follows:

Direct materials	$55
Direct labor	24
Factory overhead (57% variable)	23
Selling and administrative expenses (43% variable)	27
Total	$129.00

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 $7.06 per tire. In addition, Euro has made the order conditional on receiving European safety certification. Brightstone estimates that this certification would cost $121,253.

	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?

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.

Score: 6/143

Differential Analysis

Reject Order (Alternative 1) or Accept Order (Alternative 2)

January 21

1		Reject Order	Accept Order	Differential Effect on Income
2		(Alternative 1)	(Alternative 2)	(Alternative 2)
3	✔
4
5
6
7
8
9
10
11

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

Reject

Accept

The company is indifferent since the result is the same regardless of which alternative is chosen.

Points:

0 / 1

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

Answer 1