Radar Company sells bikes for $410 each. The company currently sells 4,400 bikes

Question

Radar Company sells bikes for $410 each. The company currently sells 4,400 bikes per year and could make as many as 5,000 bikes per year. The bikes cost $265 each to make: $165 in variable costs per bike and $100 of fixed costs per bike. Radar received an offer from a potential customer who wants to buy 900 bikes for $350 each. Incremental fixed costs to make this order are $42,000. No other costs will change if this order is accepted. Compute Radar's additional income (ignore taxes) if it accepts this order. Incremental IncrementalIncremental Amount per Fixed Income from New Unit Costs Business Contribution margin Incremental income (loss) from new business The company should

Explanation / Answer

Incremental Amount per Unit Incremental Fixed Costs Incremental Income from New Business Sales 350 315000 Variable cost 165 148500 Contribution margin 185 166500 Fixed costs 42000 42000 Incremental income (loss) from new business 124500 The company should Accept the order

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