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