Brian's Bikes produces bicycles sold to sports stores for $200 each. The plant capacity is 100,000...
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Brian's Bikes produces 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:
Direct materials: $60.00 per unit; Total: $4,800,000
Direct labor: $30.00 per unit; Total: $2,400,000
Manufacturing support: $50.00 per unit; Total: $4,000,000
Selling and administrative: $20.00 per unit; Total: $1,600,000
Total costs: $160.00 per unit; Total: $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 Brian's Bikes should accept this special order. Include a sensitivity analysis to explore different scenarios.
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