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An electronics firm is presently manufacturing an item that has a variable cost of $0.50 per unit and a selling price of $1.00 per unit. Fixed costs are$14,000 per month. present volume is 30,000 units per month. The firm wants to better the product quality by adding a new piece of equipment at an additional fixed cost of $6,000 a month. Variable cost would enhance to $0.60 a unit but volume should jump to 50,000 units a month due to improved productivity. Though the new product is of a higher quality, the firm intends to stay with the selling price of $1.00 per unit (for competitive purposes).
(a) Should the firm buy the latest equipment?
(b) The firm is now considering stepping the new volume to 45,000 units a month to make even better quality products and enhance the selling price to $1.10 a unit. Under these circumstances, should the company buy the latest equipment and enhance the selling price?
What can middle managers do to moderate the distortions introduced by such biases?
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I have problem in subject econometrics, how i get solved questions in econometrics.
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