Bike with Me Co. manufactures bikes. The company currently sells one particular bike for $100.00. A customer has approached the company and would like to make a special order for 2,000 bikes. Due to the large order, the client would like a discount and offered to pay $75.00 per bike. Bike with Me Co. is trying to determine if they should accept the special order. Bike with Me Co. currently sells 24,000 bikes per year and has the capacity to produce 25,000 bikes. The company has provided information on costs to produce the bikes as follows:

Per Unit:

Direct Materials $30

Direct Labour $10

Manufacturing Overhead $20

The variable portion of the manufacturing overhead is $8 per unit. The order would have no effect on the company's total fixed manufacturing overhead costs. If the special order is accepted, the company would not be able to fulfill all of its regular customer sales.

Required:

a) Compute the total contribution margin currently earned by the Company (3 marks)

b) Calculate the incremental operating income if the company accepts the special order (7 marks)

b. Should the company accept this special order? (1 mark)