Radar company sells bikes for $350 each. the company currently sells 4,200 bikes per year and could make as many as 5,000 bikes per year. the bikes cost $270 each to make; $155 in variable costs per bike and $115 of fixed costs per bike. radar received an offer from a potential customer who wants to buy 775 bikes for $380 each. incremental fixed costs to make this order are $51,000. no other costs will change if this order is accepted. compute radar’s additional income (ignore taxes) if it accepts this order. incrementalamount from new businesssales ? ? variable cost ? ? contribution margin ? ? fixed costs ? ? incremental income (loss) from new business ? the company should ? *? = blanks that need answers

The Radar’s additional income  is $123,375 and the order should be accepted.

Explanation:

For computing the additional income, we need to calculate the following calculations which is shown below:

1. New sales = Number of New bikes × per bike price

                    = 775 × $380

                    = $294,500

2. New variable cost =  Number of New bikes × per variable cost price

                                  = 775 × $155

                                  = $120,125

3. Now the contribution equals to

= Sales - variable cost

=  $294,500 - $120,125

= $174,375

4. Then, the increased income is equal to

= Contribution - Fixed cost

= $174,375 - $51,000

= 123,375

After calculation, we get to know that the incremental income is come in positive amount which is good for a company.

And, the fixed cost remains same because it does not change with the production level

Thus, the Radar’s additional income  is $123,375 and the order should be accepted.