Odin Avionics makes aircraft instrumentation. Its basic navigation radio requires

$ 90$90

in variable costs and

$ 3 comma 000$3,000

per month in fixed costs. Odin sells

1010

radios per month. If the company further processes the radio, to enhance its functionality, it will require an additional

$ 27$27

per unit of variable costs, plus an increase in fixed costs of

$ 270$270

per month. The current sales price of the radio is

$ 290$290.

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 of $ 290$290

B.

at a sales price lower than $ 290$290

C.

at a sales price of $ 407$407

D.

at a sales price higher than $ 344$344

Kim Sunshades Company's western territory's forecasted income statement for the upcoming year is as follows:

Sales revenue	$ 840 comma 000$840,000
Variable costs	(540 comma 000540,000)
Contribution margin	$ 300 comma 000$300,000
Fixed costs	(480 comma 000480,000)
Operating loss	$(180 comma 000180,000)

The company's management is considering dropping the western territory and has determined that

9090%

of the fixed costs are avoidable. What is the change in the forecasted operating loss for the upcoming year if the western territory is dropped? Assume the company predicts an operating loss across the entire company.

A.

The loss will be reduced by

$ 432 comma 000$432,000.

B.

The loss will be increased by

$ 132 comma 000$132,000.

C.

The loss will be increased by

$ 432 comma 000$432,000.

D.

The loss will be reduced by

$ 132 comma 000$132,000.

Valuable Electronics uses a standard part in the manufacture of different types of radios. The total cost of producing

30 comma 00030,000

parts is

$ 110 comma 000$110,000,

which includes fixed costs of

$ 50 comma 000$50,000

and variable costs of

$ 60 comma 000$60,000.

The company can buy the part from an outside supplier for

$ 3$3

per unit and avoid

3030%

of the fixed costs. Assume that the company can use the freed manufacturing space to make another product that can earn a profit of

$ 17 comma 000$17,000.

If Valuable outsources, what will be the effect on operating income?

A.

increase of $ 17 comma 000$17,000

B.

increase of $ 2 comma 000$2,000

C.

decrease of $ 15 comma 000$15,000

D.

decrease of $ 2 comma 000$2,000