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 ________.

Question

Quizplus · Accepted Answer

The increase in sales price per unit is $20 ($300 - $280), leading to an additional $800 in revenue for 40 units. The additional variable cost is $27 per unit, totaling $1080 for 40 units. The increase in fixed costs is $280. The total additional cost is $1360 ($1080 + $280). The net effect is a decrease in operating income by $560 ($800 - $1360).

Viper Avionics Makes Aircraft Instrumentation