Nordic Avionics Makes Aircraft Instrumentation

question 133

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 the company upgrades the radio further to enhance its functionality,it will require an additional $25 per unit of variable costs,plus an increase in fixed costs of $800 per month.The marketing manager believes that they would be able to boost the price of the radio from $260 to $300.Nordic sells 30 radios per month.If Nordic decides to produce the improved version of the radio,what would the impact be on monthly operating income?

• A)It would increase by $1,050.
• B)It would increase by $250.
• C)It would decrease by $350.
• D)It would decrease by $750.

---

Definitions:

Total Revenue

The total amount of money a firm receives from sales of its products or services before any expenses are subtracted.

Demand

The total quantity of a good or service that consumers are willing and able to purchase at various price levels at a given time period.

Unit Elastic

A demand or supply situation where a percentage change in price results in an equal percentage change in the quantity demanded or supplied.

Revenue Inelastic

A situation where the revenue from a product does not significantly change with fluctuations in its price, indicating a low sensitivity to price changes.