Should the company buy the new equipment

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Reference no: EM131258087

An electronics firm is currently manufacturing an item that has a variable cost of $.50 per unit and a selling price of $1.00 per unit. Fixed costs are $14,000. Current 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 $6,000.

Variable cost would increase to $.60, but volume should jump to 50,000 units due to a higher-quality product. Should the company buy the new equipment?

Reference no: EM131258087

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