Question

Celaneo Avionics makes aircraft instrumentation. Its basic navigation radio requires​ $60 in variable costs and​ $4,000 per month in fixed costs. Celaneo 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 per month. The current sales price of the radio is​ $280.The CEO wishes to improve opertaing income by $1,100 per month by seloling the enhanced version of the radio. In order to meet this target, the sales price to be charged for the enhanced product is ______.

Answer 1

Answer:

$400 per unit

Explanation:

Variable cost $60 * 20 units = 1200

Fixed cost = $4000

Total current cost is $5,200

Total sales is 280 * 20 = $5,600

net income (Sales - Total cost) = $400

If CEO wants to increase net income by $1,100 the

Net income = Total sales - Variable cost -Fixed cost

Net income $1,500 = x - ($60 + $40) * 20 units - $4,000+ $500

Total sales = $1,500 + $2,000 + $4,500

Total sales = $8,000

Sales price per unit = $8,000 / 20 units

Sales price per unit = $400 / unit