Nordic Avionics Makes Aircraft Instrumentation

question 140

Multiple Choice

Nordic Avionics makes aircraft instrumentation. Their basic navigation radio requires $80 in variable costs and requires $2,000 per month in fixed costs. If they process the radio further to enhance its functionality, it will require an additional $25 per unit of variable costs, but no change to the fixed costs. The marketing manager believes that they would be able to boost their price of the radio from $260 to $280. If they do so, how would the change affect operating income?

• A)It would remain the same.
• B)It would go up by $25 per unit.
• C)It would go up by $20 per unit.
• D)It would go down by $5 per unit.

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