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Should super cables buy the new equipment

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Reference no: EM132320799

Super Cables Inc. is currently manufacturing an adapter that has a variable cost of $0.55 per unit and a selling price of $1.10 per unit. Fixed costs 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 $7,000 on the top of the original $14,000. Variable costs would increase to $0.65, but sales volume should jump to 50,000 units due to a higher-quality product.

1. What's the Break Even Point for adding the new equipment?

2. Should Super Cables buy the new equipment?

Reference no: EM132320799

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