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bazaltina [42]
3 years ago
5

Q 20.27: Liberty Bicycles currently sells unassembled bikes for $240 each. The variable production costs for each bike are $35 a

nd the fixed production costs are $72. Liberty is thinking about selling the bikes fully assembled for $300 each. The variable costs for assembling one bike will be $18 and the fixed costs will be $31. Given these figures, Liberty will increase its net income per unit by ________ if it opts to assemble the bikes.
Business
1 answer:
alukav5142 [94]3 years ago
4 0

Answer:

$11

Explanation:

Find the incremental effect on net income of assembling the bikes as follows :

<u>Incremental analysis for assembling the bikes per unit</u>

Sales ( $300 - $240)                    $60

Less incremental costs :

Variable costs                               ($18)

Fixed production costs                 ($31)

Incremental Income/(loss)              $11

<u>Conclusion</u>

Thus  Liberty will increase its net income per unit by $11  if it opts to assemble the bikes.

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