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Audiocables inc is currently manufacturing an adapter that has a variable cost of $0.50 per unit and a selling price of $1.20 per unit. Fixed costs are $14,000. Current sales volume is 30,000 units. The firm can substantially improve the product quality be adding a new piece of equipment at an additional fixed cost of $6,000. Variable costs would increase to$0.60, but sales volume should jump to 50,000 units due to higher quality products. What is the current profit and proposed profit of the sales of Audiocables? Should audiocables buy new equipment?

Audiocables inc is currently manufacturing an adapter that has a variable cost of $0.50 per unit and a selling price of $1.20 per unit. Fixed costs are $14,000. Current sales volume is 30,000 units. The firm can substantially improve the product quality be adding a new piece of equipment at an additional fixed cost of $6,000. Variable costs would increase to$0.60, but sales volume should jump to 50,000 units due to higher quality products. What is the current profit and proposed profit of the sales of Audiocables? Should audiocables buy new equipment?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Audiocables inc is currently manufacturing an adapter that has a variable cost of $0.50 per unit and a selling price of $1.20 per unit. Fixed costs are $14,000. Current sales volume is 30,000 units. The firm can substantially improve the product quality be adding a new piece of equipment at an additional fixed cost of $6,000. Variable costs would increase to$0.60, but sales volume should jump to 50,000 units due to higher quality products. What is the current profit and proposed profit of the sales of Audiocables? Should audiocables buy new equipment?
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