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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?
After reading through the articles provided in your Assigned Reading and Research, Review one of the articles using the following format with the headings indicated in bold below:
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