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Radar Company sells bikes for $510 each. The company currently sells 4,450 bikes per year and could make as many as 4,760 bikes per year. The bikes cost $230 each to make: $190 in variable costs per bike and $40 of fixed costs per bike. Radar receives an offer from a potential customer who wants to buy 310 bikes for $490 each. Incremental fixed costs to make this order are $70 per bike. No other costs will change if this order is accepted. (a) Compute the income for the special offer. (b) Should Radar accept this offer? (a) Special offer analysis Per Unit Total Contribution margin Income (b) The company should Accept special offer

Radar Company sells bikes for $510 each. The company currently sells 4,450 bikes per year and could make as many as 4,760 bikes per year. The bikes cost $230 each to make: $190 in variable costs per bike and $40 of fixed costs per bike. Radar receives an offer from a potential customer who wants to buy 310 bikes for $490 each. Incremental fixed costs to make this order are $70 per bike. No other costs will change if this order is accepted. (a) Compute the income for the special offer. (b) Should Radar accept this offer? (a) Special offer analysis Per Unit Total Contribution margin Income (b) The company should Accept special offer

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Radar Company sells bikes for $510 each. The company currently sells 4,450 bikes per year and could make as many as 4,760 bikes per year. The bikes cost $230 each to make: $190 in variable costs per bike and $40 of fixed costs per bike. Radar receives an offer from a potential customer who wants to buy 310 bikes for $490 each. Incremental fixed costs to make this order are $70 per bike. No other costs will change if this order is accepted. (a) Compute the income for the special offer. (b) Should Radar accept this offer? (a) Special offer analysis Per Unit Total Contribution margin Income (b) The company should Accept special offer
Transcribed Image Text:Radar Company sells bikes for $510 each. The company currently sells 4,450 bikes per year and could make as many as 4,760 bikes per year. The bikes cost $230 each to make: $190 in variable costs per bike and $40 of fixed costs per bike. Radar receives an offer from a potential customer who wants to buy 310 bikes for $490 each. Incremental fixed costs to make this order are $70 per bike. No other costs will change if this order is accepted. (a) Compute the income for the special offer. (b) Should Radar accept this offer? (a) Special offer analysis Per Unit Total Contribution margin Income (b) The company should Accept special offer
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