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QS 2 3 - 2 0 ( Algo ) Special offer pricing LO P 7 1 points References Radar Company sells bikes for $ 5

QS 23-20(Algo) Special offer pricing LO P7
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Radar Company sells bikes for $530 each. The company currently sells 4,150 bikes per year and could make as many as 4,500 bikes per year. The bikes cost $250 each to make: $180 in variable costs per bike and $70 of fixed costs per bike. Radar receives an offer from a potential customer who wants to buy 350 bikes for $490 each. Incremental fixed costs to make this order are $80 per bike. No other costs will change if this order is accepted.
(a) Compute the income for the special offer.
(b) Should Radar accept this offer?
\table[[(a) Special offer analysis,Per Unit,Total],[Sales,$,490,$,171,500],[Variable costs,,180,,63,000],[Contribution margin,$,310,,108,500],[Fixed costs (incremental),,,,],[Income r,,310,,],[(b) The company should,,,,]]
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