Odin Avionics makes aircraft instrumentation
Its basic navigation radio requires $90 in variable costs and $2,000 per month in fixed costs. Odin sells 30 radios per month. If the company further processes the radio, 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 current sales price of the radio is $260. The marketing manager is sure that Odin can charge a higher sales price for the improved version. At what sales price level would the new, improved radio begin to improve operating earnings? (Round to the nearest whole dollar.)
A) at a sales price higher than $312
B) at a sales price of $260
C) at a sales price lower than $260
D) at a sales price of $375
A .A)
Incremental variable cost $750
Add: increase in fixed cost 800
Total incremental cost $1,550
Incremental cost per unit ($1,550 / 30 ) $51.67
Add: Current sales price 260
Sales price to be charged $312
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