Starforce Avionics Makes Aircraft Instrumentation

question 144

Multiple Choice

Starforce Avionics makes aircraft instrumentation.Its basic navigation radio requires $80 in variable costs and $3000 per month in fixed costs.Further processing the radio,to enhance its functionality,will require an additional $26 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 $270 to $290.If Starforce decides to further process the product,operating income would ________.

• A)remain the same
• B)increase by $26 per unit
• C)increase by $106 per unit
• D)decrease by $6 per unit

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Definitions:

Escrow Completed

The point at which all conditions of a real estate transaction are met and the title of the property is transferred from the seller to the buyer.

Monthly Fixed Cost

Regular expenses that do not vary with production level or sales volume, incurred on a monthly basis.

Variable Manufacturing Cost Per Unit

The total variable costs involved in manufacturing a product, divided by the number of units produced.

Overhead Cost

Expenses related to the operation of a business that cannot be directly tied to a specific product or service, such as rent and utilities.