Radar Company sells bikes for $530 each. The company currently sells 4,000 bikes per year and could make as many as 4,380 bikes per year. The bikes cost $300 each to make: $185 in variable costs per bike and $115 of fixed costs per bike. Radar receives an offer from a potential customer who wants to buy 380 bikes for $510 each.
Radar Company sells bikes for $530 each. The company currently sells 4,000 bikes per year and could make as many as 4,380 bikes per year. The bikes cost $300 each to make: $185 in variable costs per bike and $115 of fixed costs per bike. Radar receives an offer from a potential customer who wants to buy 380 bikes for $510 each.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Radar Company sells bikes for $530 each. The company currently sells 4,000 bikes per year and could make as many as 4,380 bikes per year. The bikes cost $300 each to make: $185 in variable costs per bike and $115 of fixed costs per bike. Radar receives an offer from a potential customer who wants to buy 380 bikes for $510 each. Incremental fixed costs to make this order are $100 per bike. No other costs will change if this order is accepted.
Transcribed Image Text:Radar Company sells bikes for $530 each. The company currently sells 4,000 bikes per year and could make as many as 4,380 bikes
per year. The bikes cost $300 each to make: $185 in variable costs per bike and $115 of fixed costs per bike. Radar receives an offer
from a potential customer who wants to buy 380 bikes for $510 each. Incremental fixed costs to make this order are $100 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
Reject special offer
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