Viper Avionics Makes Aircraft Instrumentation

question 107

Multiple Choice

Viper Avionics makes aircraft instrumentation.Its basic navigation radio requires $90 in variable costs and $4000 per month in fixed costs.Further processing the radio,to enhance its functionality,will require an additional $27 per unit of variable costs,plus an increase in fixed costs of $280 per month.The marketing manager believes that they would be able to increase the sales price of the radio from $280 to $300.Viper sells 40 radios per month.If Viper decides to further process the radio,monthly operating income would ________.

• A)increase by $800
• B)increase by $4960
• C)decrease by $560
• D)decrease by $4960

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Definitions:

Completion

The act of finishing a task, project, or production process.

Molding Department

A specialized section of a manufacturing company focused on producing parts by shaping materials in molds.

Weighted-Average Method

A costing method that averages all costs and applies them to output, typically used in process costing.

Conversion Cost

The aggregate cost of direct labor and manufacturing overhead associated with converting raw materials into finished goods.