Question

Radar Company sells bikes for $370 each. The company currently sells 5,450 bikes per year and could make as many as 5,000 bikes per year. The bikes cost $285 each to make: $170 in variable costs per bike and $115 of fixed costs per bike. Radar received an offer from a potential customer who wants to buy 850 bikes for $340 each. Incremental fixed costs to make this order are $45,000. No other costs will change if this order is accepted. Compute Radar's additional income (ignore taxes) if it accepts this order. Incremental Fixed Costs Incremental Amount per Unit Incremental Income from New Business Contribution margin Incremental income (loss) from new business The company should

Answer 1

Answer:

	Incremental Amount per Unit	Incremental Fixed Costs	Incremental Income from New Business	Calculation
Sales	$340		2,89,000	340*850
Variable cost	170		1,44,500	170*850
Contribution margin	$170		1,44,500	289000-144500
Fixed costs		45000	45,000
Incremental income (loss) from new business			99,500
The company should			Accept the order.