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Decision on accepting additional business Miramar Tire and Rubber Company has capacity to produce 250,000 tires. Miramar presently produces and sells 200.000 tires for the North American market at a price of $40 per lire. Miramar is evaluating a special order from a South American automobile company. Rio Motors. Rio Motors is offering to buy 40.000 tires for $20 per tire. Miramar's accounting system indicates that the total cost per tire is as follows: Miramar pays a sales 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 $1.50 per tire. In addition Rio has made the order conditional on Miramar Tire and Rublxrr Company receiving a Brazilian safety certification. Rio estimates that this certification would cost Miramar Tire $20,000. a.Prepare a differential analysis report for the proposed sale to Rio Motors. b.What is the minimum price per unit that would be financially acceptable lo Miramar?

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
Publisher: Cengage Learning
ISBN: 9781305961883
BuyFind

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
Publisher: Cengage Learning
ISBN: 9781305961883

Solutions

Chapter
Section
Chapter 12, Problem 12.14E
Textbook Problem

Decision on accepting additional business
Miramar Tire and Rubber Company has capacity to produce 250,000 tires. Miramar presently produces and sells 200.000 tires for the North American market at a price of $40 per lire. Miramar is evaluating a special order from a South American automobile company. Rio Motors. Rio Motors is offering to buy 40.000 tires for $20 per tire. Miramar's accounting system indicates that the total cost per tire is as follows:

Chapter 12, Problem 12.14E, Decision on accepting additional business Miramar Tire and Rubber Company has capacity to produce
Miramar pays a sales 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 $1.50 per tire. In addition Rio has made the order conditional on Miramar Tire and Rublxrr Company receiving a Brazilian safety certification. Rio estimates that this certification would cost Miramar Tire $20,000.
a.Prepare a differential analysis report for the proposed sale to Rio Motors.
b.What is the minimum price per unit that would be financially acceptable lo Miramar?

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Chapter 12 Solutions

Survey of Accounting (Accounting I)
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