Nordin Avionics Makes Aircraft Instrumentation

Nordin Avionics makes aircraft instrumentation. Their basic navigation radio requires $80 in variable costs and requires $2,000 per month in fixed costs. If they process the radio further to enhance its functionality, it will require an additional $25 per unit of variable costs, but no change to the fixed costs. The marketing manager believes they would be able to boost their price of the radio from $260 to $280. If they do so, how would the change affect operational income?

A) It would remain the same.
B) It would go up by $25 per unit.
C) It would go up by $20 per unit.
D) It would go down by $5 per unit.

Correct Answer:

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