Starforce Avionics Makes Aircraft Instrumentation

question 84

Multiple Choice

Starforce Avionics makes aircraft instrumentation.Its basic navigation radio requires $80 in variable costs and $5000 per month in fixed costs.Further processing the radio,to enhance its functionality,will require an additional $28 per unit of variable costs but no change to the fixed costs.The marketing manager believes that the company would be able to increase the sales price from $290 to $310.If Starforce decides to further process the product,operating income would ________.

• A) remain the same
• B) increase by $28 per unit
• C) increase by $108 per unit
• D) decrease by $8 per unit

---

Definitions:

Underapplied

Refers to a situation where the allocated or applied costs in an accounting period are less than the actual costs incurred.

Cost of Goods Sold

Represents the total expense incurred from creating or acquiring the goods that a business sells during a period, crucial for evaluating profitability.

Income Statement

A financial statement that shows a company's revenue and expenses over a specific period, resulting in a net income or loss.

Cost of Goods Sold

Expenses directly connected to the crafting of merchandise a company markets, comprising materials and labor.