1248 Chapter 24 Differential Analysis and Product Pricing Obj. 1 V A Differential revenues, $15,000,000 EX 24-15 Decision on accepting additional business Talladega Time and Bubber Coman has capacity to produce 500.000 tires. Talladega presently produces and sells 400.000 tires for the North American market at a price of $200 per tire Talladega is evaluating a special order from a European automobile company, Autobahn Mo tors. Autobahn is offering to buy 100.000 tires for $150 per tire. Talladega's accounting system indicates that the total cost per tire is as follows: )) SHIN ME HOW EXCEL TEMPLATE $ 75 20 Direct materials Direct labor Factory overhead (70% variable) Selling and administrative expenses (60% variable) 18 $123 Total Talladega paysa selling commission equal to 3% of the selling price on North American orders, which is included in the variable portion of the selling and administrative expenses. However, this special order would not have a stes commission. If the order was accepted, the tires would be shipped overseas for an additional shipping cost of $3 per time. In addition, Autobahn has made the order conditional on receiving European safety certification Talladega estimates that this certification would cost $400,000 A. Prepare a differential analysis dated July 31 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Autobahn Motors B. What is the minimum price per unit that would be financially acceptable to Talladega? B. $40.00 EX 24-16 Product cost method of product pricing Obj. 2 La Femme Accessories Inc. produces women's handbags. The cost of producing 800 handbags is as follows: SHOW ME NOW Direct materials Direct labor Factory overhead Total manufacturing cost $18,000 8.500 5.500 $32,000 The selling and administrative expenses are $17,000. The management desires a profit equal to 22% of invested assets of $250,000 A. Determine the amount of desired profit from the production and sale of 800 handbags B. Determine the product cost per unit for the production of 800 handbags C. Determine the product cost markup percentage for handbags. D. Determine the selling price of handbags o 2 D. $325 EX 24-17 Product cost method of product costing Smart Stream Inc, uses the product cost method of applying the cost-plus approach to produce pricing. The costs of producing and selling 10,000 cell phones are as follows: $150 Fixed costs: Factory overhead Selling and admin. exp. $250 000 140.000 25 Variable costs per unit Direct materials Direct labor Factory overhead Selling and administrative expenses Total variable cost per unit 25 $240 Smart Stream desires a profit equal to a 30% return on invested assets of $1,200,000