Audio Cables, Inc. is currently manufacturing an adapter that has a - 13549

Solution Posted by
yousafbhutta

yousafbhutta

Rating : (28)C
Solution Detail
Price: $2.00
  • From: Business,
  • Posted on: Tue 28 Aug, 2012
  • Request id: None
  • Purchased: 0 time(s)
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Request Description

Audio Cables, Inc. is currently manufacturing an adapter that has a variable cost of $0.50 and a selling price of $1.00 per unit. Fixed costs are $14000. Current sales volume is 30,000. The form can substantially improve the product quality by adding a new piece of equipment at an additional cost of $6000. Variable costs would increase to $0.60, but sales volume should jump to 50,000 units due to a higher-quality product. Should AudioCables buy the new equipment?

Solution Description

Solution

Operating Income (Present) = (Selling Price - Variable cost) X units - fixed cost Current operating inc