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Ben's Bicycles manufactures bicycles sold to sports stores for $200 each. The plant capacity is 100,000 units annually, but normal volume is 80,000 units. Unit

Ben's Bicycles manufactures bicycles sold to sports stores for $200 each. The plant capacity is 100,000 units annually, but normal volume is 80,000 units. Unit and total costs at normal volume are:

Type of Cost

Unit Costs

Total Costs

Direct materials

$60.00

$4,800,000

Direct labor

$30.00

$2,400,000

Manufacturing support

$50.00

$4,000,000

Selling and administrative

$20.00

$1,600,000

Total costs

$160.00

$12,800,000

Fixed manufacturing support costs are $2,500,000, and fixed selling and administrative costs are $1,000,000.

A potential customer offers to buy 25,000 units at $150 each, requiring minimal packaging and reducing variable selling and administrative costs by 50%.

Required: Determine whether Ben's Bicycles should accept this special order. Include a sensitivity analysis to explore different scenarios.

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