Nordic Avionics Makes Aircraft Instrumentation

question 1

Multiple Choice

Nordic Avionics makes aircraft instrumentation.Its basic navigation radio requires $80 in variable costs and requires $2,000 per month in fixed costs.If they upgrade 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 the company would be able to boost the price of the radio from $260 to $280.If it does 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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Definitions:

Opportunity Costs

The value of the next best alternative that is foregone as a result of making a decision, used in evaluating the relative cost of different choices.

Effective Management

Effective Management involves the process of planning, organizing, directing, and controlling resources and activities efficiently and effectively towards achieving organizational goals.

Operations

The day-to-day activities required for a business to produce goods or services and run smoothly.

Book Value

The net value of a company’s assets as recorded on the balance sheet, calculated as total assets minus liabilities and intangible assets.