Answered

Get reliable answers to your questions at Westonci.ca, where our knowledgeable community is always ready to help. Explore in-depth answers to your questions from a knowledgeable community of experts across different fields. Discover in-depth answers to your questions from a wide network of professionals on our user-friendly Q&A platform.

Princeton Avionics makes aircraft instrumentation. Its basic navigation radio requires $60 in variable costs and $4,000 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 per 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

Sagot :

Kolawole845

Answer:

Sales price =$405

Explanation:

A company should process further a product if the additional revenue from the split-off point is greater than than the further processing cost.  

Also note that all cost incurred up to the split-off point are irrelevant to the decision to process further .  

                                                                                   $

Sales revenue after the split-off point                       y

Sales revenue at the split-off point (280×20)          (5,600)  

Further processing cost (40× 20)+ 500                    (1,300)    

Net advantage from further processing                    1,200

y-5600-1300=1200

y= 8,100

Sales price=  Sales revenue after the split-off point/Number of units

Sales price = 8,100/20 =$405  

Sales price =$405

Thank you for visiting. Our goal is to provide the most accurate answers for all your informational needs. Come back soon. We hope this was helpful. Please come back whenever you need more information or answers to your queries. Discover more at Westonci.ca. Return for the latest expert answers and updates on various topics.