AudioCables, Inc., is currently manufacturing an adapter that has a variable cost of $0.50 per unit and a selling price of $1.00 per unit. Fixed costs are $14,000. Current sales volume is 30,000 units. The firm can substantially improve the product quality by 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 a higher-quality product.
Breakeven of the current adapter?
Is AudioCables making profit with the current adapter and current sales volume of 30,000?
Breakeven of the new equipment?
Is AudioCables going to make profit with the new equipment and sales volume of 50,000?
Should AudioCable buy the new product?