Direct materials $ 75 Direct labor 20 Factory overhead (70% variable) Selling and administrative expenses (60% variable) Total 30 18 $143
Decision on accepting additopnal business
Talladega Tire and Rubber Company has capacity to produce 500,00 tires.Talladega presently produce and sells 4000,000 tires for the north American market at a price of $200 per tire.Talladega is evaluating a spacial order from a European automobike company,Autibahn Motors,Autobahn is offering to buy 1000,000 tires for $150 oer litre.Talladega;s accounting system indiucates that the total cost per tire is as follows:
Talladega pays a selling commission equal to 3% of the selli=ng price on North Americam orders, which is included in the variable portion of the selling and admisnistrative expenses.Hpwever, this special ordr would not have a sales commission.If the order was accepted, the tires would be shipped overseas for an additional shipping cost of $per tire.In addition<Autobahn has made the order conditional on recieving European safety certification. Talladega estimates that this certification would cost $4000.000.
A . prepare a different analysis dated july 31 on whather to rject (alternative 1) or accept (alternative 2 ) the special order fro, Aitibahn Motors.
B.What is the minimum price per unit that would be financially acceptable to Talladega?
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