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Radar Company sells bikes for $550 each. The company currently sells 4,100 bikes per year and could make as many as 4,450 bikes per year. The bikes cost $280 each to make: $175 in variable costs per bike and $105 of fixed costs per bike. Radar receives an offer from a potential customer who wants to buy 350 bikes for $530 each. Incremental fixed costs to make this order are $90 per bike. No other costs will change if this order accepted. (a) Compute the income for the special offer. (b) Should Radar accept this offer?

Radar Company sells bikes for $550 each. The company currently sells 4,100 bikes per year and could make as many as 4,450 bikes per year. The bikes cost $280 each to make: $175 in variable costs per bike and $105 of fixed costs per bike. Radar receives an offer from a potential customer who wants to buy 350 bikes for $530 each. Incremental fixed costs to make this order are $90 per bike. No other costs will change if this order accepted. (a) Compute the income for the special offer. (b) Should Radar accept this 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 $550 each. The company currently sells 4,100 bikes per year and could make as many as 4,450 bikes per year. The bikes cost $280 each to make: $175 in variable costs per bike and $105 of fixed costs per bike. Radar receives an offer from a potential customer who wants to buy 350 bikes for $530 each. Incremental fixed costs to make this order are $90 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 Sales Variable costs Contribution margin. Income (b) The company should Per Unit Total
Transcribed Image Text:Radar Company sells bikes for $550 each. The company currently sells 4,100 bikes per year and could make as many as 4,450 bikes per year. The bikes cost $280 each to make: $175 in variable costs per bike and $105 of fixed costs per bike. Radar receives an offer from a potential customer who wants to buy 350 bikes for $530 each. Incremental fixed costs to make this order are $90 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 Sales Variable costs Contribution margin. Income (b) The company should Per Unit Total
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