Oline teaching and leaming evcurce trom Cengaege Leaing Googk Chome Decision on

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Oline teaching and leaming evcurce trom Cengaege Leaing Googk Chome Decision on Accepting Additional Business Glide Ride Tire and Rubber Company has capacity to produce 179,000 res. Glde Ride presently produces and sells 137,000 tires fore h American market at a price of 110.00 per tire Clide Ride is evaluating a accounting system indicates that the botal cest per tire is as follows spedial order trom a Europea sutermotile companv. Euro Motors, euro h dering to buy ; es for $91.50 peire Glide Ride's Direct wbor e |.actory overhead (70% variable) o sdng rd administrative "penses (40% variable) Cide Ride panaseling commission eaual to5% f the seing pke on horth American arar.heh isnaded ath. However, this special arder would not have a sales commission. If the order was accepted, the dires would be shioped addtion, Euro has made the order conditional on receliving Eurspean safety certnication. Glide Ride estimates that this eing and stministrative eperses shipping cost of $6.00 per tre. tn 121,800 Prepare a difterential analysis dated May 4, 2034, on whether to reject (lberative 3) or acceot (lermative 2) the special order trom Euro Motors. Ifa enter zero f requred, round interim calculations to two decimal places acer

Explanation / Answer

Gide Ride Co Particulars Capcity to Produce 179000 Current Production and Sells 137000 Selling Price 110.00 Special Offer Qty 21000 Special Offer Price 91.50 Special Selling Commision on North America Orders 5% Special Order S&A Commision 0% Addiitional Shipping Cost 6.00 Additional Certification Cost 1,21,800 Particulars Amt Direct Material 42.00 Direct Labor 15.00 Factory OH Variable 7.50 Factory OH Fixed 17.50 S&A Expense Variable 8.80 S&A Expense Fixed 13.20 Total 104.00 Total Variable S&A Expense 8.80 Less: Variable Selling Commsiion on NA Orders 5.50 (110*5%) Other Variable S&A Expense 3.30 Differential Analysis: Alternative 1 Alternative 2 Particulars Reject Order Accept Order Differential effect on Income Reject Order Accept Order Differential effect on Income Revenue 15070000 16991500 1921500 137000*110 (137000*110)+(21000*91.50) Accept Order-Reject Order Costs: Direct Material 5754000 6636000 882000 137000*42 (137000*42)+(21000*42) Accept Order-Reject Order Direct Labor 2055000 2370000 315000 137000*15 (137000*15)+(21000*15) Accept Order-Reject Order Variable FOH 1027500 1185000 157500 137000*7.5 (137000*7.5)+(21000*7.50) Accept Order-Reject Order Variable S&A Expense 1205600 1274900 69300 137000*8.8 (137000*8.8)+(21000*3.30) Accept Order-Reject Order Shipping Cost 0 126000 126000 0 (21000*6) Accept Order-Reject Order Certfication Cost 0 121800 121800 0 Directly Given Accept Order-Reject Order Income(Loss) 5027900 5277800 249900 Revenue-Costs Revenue-Costs Revenue-Costs A Since the Differential Effect on Income is Positive the Company Should Accept the Proposal B Minimum Price Acceptable to Supplier Co: Since the company has idle capacity; the minimum Price will be cost to be incurred only: Particulars Amt Direct Material 42.00 Direct Labor 15.00 Factory OH Variable 7.50 Other Variable S&A Expense(Other than Commision) 3.30 Addiitional Shipping Cost 6.00 Additional Certification Cost 5.80 Total Minimum Price 79.60 Thank You!

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