Question

Radar company sells bikes for $490 each. the company currently sells 4,100 bikes per year and could make as many as 4,480 bikes per year. the bikes cost $260 each to make: $165 in variable costs per bike and $95 of fixed costs per bike. radar receives an offer from a potential customer who wants to buy 380 bikes for $450 each. incremental fixed costs to make this order are $80 per bike. no other costs will change if this order is accepted. compute the income for the special offer.

Answer 1

The income for the special offer of 380 bikes at $450 each would be $77,900.

Step-by-step explanation:

To calculate the income for the special offer of 380 bikes at $450 each, we first need to calculate the incremental costs of producing these bikes. The incremental fixed costs are $80 per bike, so for 380 bikes, the total incremental fixed costs would be $30,400 (380 x $80). The total incremental variable costs can be calculated by multiplying the variable cost per bike by the number of bikes, which is $165 per bike x 380 bikes = $62,700.

Now, we can calculate the income for the special offer by subtracting the total incremental costs from the revenue generated. The revenue for the offer is $450 per bike x 380 bikes = $171,000. Therefore, the income for the special offer would be $171,000 - $30,400 - $62,700 = $77,900.