Princeton Avionics makes aircraft instrumentation. Its basic navigation radio re

Question

Princeton Avionics makes aircraft instrumentation. Its basic navigation radio requires $60 in variable costs and S4.000 per month in fixed costs. Princeton sells 20 radios per month. If the company further processes the radio, to enhance its functionality, it will require an additional $40 per unit of variable costs, plus an increase in fixed costs of $500 pesr month. The current sales price of the radio is $280. The CEO wishes to improve operating income by $1,200 per month by selling the enhanced version of the radio. In order to meet this target, the sales price to be charged for the enhanced product is Select one A.$320 per unit O B. $380 per unit C, $125 per urut O D. $405 per unit

Explanation / Answer

incremental variable cost 800 Add:increase in fixed csot 500 add:target operating income 1,200 incremental cost per unit 125 add:current sales price 280 sales price to be charged 405 answer option D   $405 per unit

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