Tire and Rubber Company has capacity to produce 250,000 tires. Miramar presently produces and sells 200,000 tires for the North American market at a price of $40 per tire. Miramar is evaluating a special order from a South American automobile company, Rio Motors. Rio Motors is offering to buy 40,000 tires for $20 per tire. Miramar's accounting system indicates that the total cost per tire is as follows:Miramar pays a selling commission equal to 4% 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 sales commission. If the order was accepted, the tires would be shipped overseas for an additional shipping cost of $1.50 per tire. In addition, Rio has made the order conditional on Miramar Tire Company receiving a Brazilian safety certification. Rio estimates that this certification would cost Miramar Tire $20,000.When required, round all per unit answers to nearest cent. Enter all amounts as positive numbers.Direct Materials 10.00Direct Labor 5.00fact overhead(45% variable) 4.00Selling and Admin expens (75% var) 3.00Total 22.00I just need to know how the 18.95 for the variable special product cost was received. Proposal to Sell to Rio Motors August 7, 2012 Per Unit Total Differential revenue from accepting special offer Total differential costs $ $ $ Differential costs from accepting special offer: Direct materials $ Direct labor $ $ Total differential costs $
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