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AudioCables, Inc. is currently manufacturing an adapter that has a variable cost of $.50 per unit and selling price of $1.00 per unit. Fixed cost are $14,000. Current sales volume is 30,000 units. The firm can substantially improve the product quality by adding a new piece of equipment at an additional fixed cost of $6000. Variable costs would increase to $.60 but sales volume should jump to 50,000 units due to higher quality product. Should Audio Cables buy the new equipment?
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https://brainmass.com/business/business-management/audiocables-manufacturing-process-problem-295442
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Current Profit = 30,0001 – 30,000.5 – 14,000 = 1,000
Profit after …
