Radar Company sells bikes for $310 each. The company currently sells 4,650 bikes
ID: 2585267 • Letter: R
Question
Radar Company sells bikes for $310 each. The company currently sells 4,650 bikes per year and could make as many as 5,000 bikes per year. The bikes cost $290 each to make, $155 in variable costs per bike and $135 of fixed costs per bike. Radar received an offer from a potential customer who wants to buy 350 bikes for $360 each. Incremental fixed costs to make this order are $58,000 No other costs will change if this order is accepted Compute Radar's additional income (ignore taxes) if it accepts this order Incremental Incremental Income from New Amount per Fixed Costs Business Incremental Sales cost Contribution margin S 135 xed costs Incremental income (loss) from new business The company should O Type here to search play P202 19 F9 F12Explanation / Answer
Incremental amount per unit
Incremental fixed costs
Incremental income from new business
Sales
$360
$126,000
variable cost
$155
$54,250
contribution margin
$205
$71,750
fixed costs
$58,000
($58,000)
incremental income or loss from new business
$13,750
the company should
Accept the order
Particulars
Amount
sales (350units@360)
$126,000
incremental variable cost(350 units@155)
($54,250)
incremental fixed cost
($58,000)
Incremental income from new business
$13750
Incremental income from new business
Therefore the company should accept the offer for new business as it increases income by $13,750
Incremental amount per unit
Incremental fixed costs
Incremental income from new business
Sales
$360
$126,000
variable cost
$155
$54,250
contribution margin
$205
$71,750
fixed costs
$58,000
($58,000)
incremental income or loss from new business
$13,750
the company should
Accept the order
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