a) Explanation Differential Analysis: Differential analysis refers to the analysis of differential revenue that could be gained or differential cost that could be incurred from the available alternative options of business. The differential analysis of Company TTR on July 31, for the given alternatives is shown below. Differential Analysis of Company TTR Reject Order (Alt. 1) or Accept Order (Alt. 2) July 31 Reject Order (Alternative 1) Accept Order (Alternative 2) Differential Effect on income Revenues $0 (1) $15,000,000 $15,000,000 Costs: Direct Materials $0 (2) (-)$7,500,000 (-) $7,500,000 Direct Labor $0 (3) (-)$2,000,000 (-) $2,000,000 Variable Factory Overhead $0 (4) (-)$2,100,000 (-) $2,100,000 Variable selling and administrative expenses (5 years) $0 (5) (-) $480,000 (-) $480,000 Shipping Cost $0 (6) (-) $300,000 (-) $300,000 Certification Cost $0 (-) $400,000 (-) $400,000 Income (loss) $0 $2,220,000 $2,220,000 Table (1) The differential analysis of Company TTR on July 31 shows that accepting the order shall yield a greater income of $2,220,000 . Hence, the order should be accepted. Working Note: (1) Calculate the revenues from accepting the order. Revenue = $150 × 100,000 tires = $15,000,000 (2) Calculate the direct materials for fulfilling the order. Direct Materials = $75 × 100,000 tires = $7,500,000 (3) Calculate the direct labor for fulfilling the order b) To determine Ascertain the minimum price per unit which would be financially accepted by Company TTR.

Financial and Managerial Accounting - CengageNow

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ISBN: 9781337911979

Author: WARREN

Publisher: CENGAGE L

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Question

Chapter 25, Problem 15E

To determine

Prepare the differential analysis of Company TTR on July 31, to decide whether to reject or accept the proposal.

To determine

Ascertain the minimum price per unit which would be financially accepted by Company TTR.

Expert Solution & Answer

Chapter 25 Solutions

Financial and Managerial Accounting - CengageNow

Ch. 25 - Explain the meaning of (A) differential revenue,...Ch. 25 - A company could sell a building for 250,000 or...Ch. 25 - A chemical company has a commodity-grade and...Ch. 25 - A company accepts incremental business at a...Ch. 25 - A company fabricates a component at a cost of...Ch. 25 - Prob. 6DQ Ch. 25 - In the long run, the normal selling price must be...Ch. 25 - Although the cost-plus approach to product pricing...Ch. 25 - How does the target cost method differ from...Ch. 25 - Prob. 10DQ

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