Radar Company sells bikes for $540 each. The company currently sells 4,400 bikes per year and could make as many as 4,750 bik per year. The bikes cost $250 each to make: $160 in variable costs per bike and $90 of fixed costs per bike. Radar receives an offe from a potential customer who wants to buy 350 bikes for $510 each. Incremental fixed costs to make this order are $90 per bike. M other costs will change if this order is accepted. (a) Compute the income for the special offer. (b) Should Radar accept this offer?

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter10: Short-term Decision Making
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Homework i
5
A
Radar Company sells bikes for $540 each. The company currently sells 4,400 bikes per year and could make as many as 4,750 bikes
per year. The bikes cost $250 each to make: $160 in variable costs per bike and $90 of fixed costs per bike. Radar receives an offer
from a potential customer who wants to buy 350 bikes for $510 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
O
Contribution margin
Income
(b) The company should
::
FI
@
2
W
S
F2
#
3
E
Per Unit
80
F3
MAR
29
$
4
R
Total
a
F4
%
5
< Prev
0
F5
T
D F G
Saved
6
8 of 11
c
F6
tv
Y
&
7
A
F7
Next >
Autoch
U
8
DII
FB
1
1
alı
(
DD
9
F9
)
O
A
F10
H J K L
Transcribed Image Text:Homework i 5 A Radar Company sells bikes for $540 each. The company currently sells 4,400 bikes per year and could make as many as 4,750 bikes per year. The bikes cost $250 each to make: $160 in variable costs per bike and $90 of fixed costs per bike. Radar receives an offer from a potential customer who wants to buy 350 bikes for $510 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 O Contribution margin Income (b) The company should :: FI @ 2 W S F2 # 3 E Per Unit 80 F3 MAR 29 $ 4 R Total a F4 % 5 < Prev 0 F5 T D F G Saved 6 8 of 11 c F6 tv Y & 7 A F7 Next > Autoch U 8 DII FB 1 1 alı ( DD 9 F9 ) O A F10 H J K L
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