Decision on Accepting Additional Business Talladega Tire and Rubber Company has capacity to produce1

Decision on Accepting Additional Business Talladega Tire and Rubber Company has capacity to produce179,000 tires. Talladega presently produces and sells 137,000 tiresfor the North American market at a price of $95 per tire. Talladegais evaluating a special order from a European automobile company,Autobahn Motors. Autobahn is offering to buy 21,000 tires for$78.85 per tire. Talladega’s accounting system indicates that thetotal cost per tire is as follows: Talladega pays a selling commission equal to 5% oof the sellingprice on North American orders, which is included in the variableportion of the selling and administrative expenses. However, thisspecial order would not have a sales commission. If the order wasaccepted, the tires would be shipped overseas for an additionalshipping cost of $5 per tire. In addition, Autobahn has made theorder conditional on receiving European safety certification.Talladega estimates that this certification would cost$105,000. a. Prepare a differential analysis dated July31 on whether to reject (Alternative 1) or accept (Alternative 2)the special order from Autobahn Motors. If an amount is zero, enterzero “0”. If required, round interim calculations to two decimalplaces. Determine whether to reject (Alternative 1) or accept(Alternative 2) the special order from Autobahn Motors. (accept thespecial order or reject the order)

_________ b. What is the minimum price per unit thatwould be financially acceptable to Talladega? Round your answer totwo decimal places.

$____per unit . . .

 

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