Chapter 25 Homewerk Exercise 25-15 Goodrnan Tire and Rubber Company has Euro is

Question

Chapter 25 Homewerk Exercise 25-15 Goodrnan Tire and Rubber Company has Euro is offering to buy 20,000 tires for $92 per tire. Goodman's accourting svstem capaciky to produce 170,000 bres. Goodman presentiv produces indicaten that the tutal cost per tine is as follow i s Factory ovehed 60% variable) Selling and Khiatrative openses (45% wanable) would be shipped overseas for an additbional shipping cost of $6.50 per tine. In addhon, Eung has made the arder ondtinal on rtcondcot 34200 0"requined, round interim calculations to two deomal places to two deoimal places Accept Onder Oirect labor Variable factary overhead teling and

Explanation / Answer

Differential Analysis Reject order (Alt 1) or Accept Order (Alt 2) Jan 31.2014. Some data not legible , best judgement used to capture data Reject Order Accept Order Differential Effect on Income/(loss) Details Per Unit $ Total Amt $ Per Unit $ Total Amt $ Units Sold            130,000              150,000 Revenue                   125      16,250,000                 125        16,250,000 Revenue for addl 20000 units                   92          1,840,000 Total Revenue      16,250,000        18,090,000         1,840,000 Direct Materials             38.00         4,940,000             38.00          5,700,000           (760,000) Direct Labor             16.00         2,080,000             16.00          2,400,000           (320,000) Variable Factory OH             14.40         1,872,000             14.40          2,160,000           (288,000) Variable selling & Admin expense                9.00         1,170,000                2.75              412,500             757,500 Shipping cost                6.50              975,000           (975,000) Certification cost              142,000           (142,000) Total relevant Cost        10,062,000        11,789,500       (1,727,500) Net Relevant Income /(Loss)         6,188,000          6,300,500             112,500 As there is difefrential net income, the special order should be accepted. The min accpetable price should give a net relevant income of $6188000 The total net relevant income may be lesser by $112500 from present status. So per units price may be less by 112500/20000=5.63 So Min acceptable price for special order =$92-5.625= $86.375 per unit

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.