Question: AudioCables, Inc., is currently manufacturing an adapter that has a variable cost of $. 50 per unit and a selling price of $1.00 per unit.

AudioCables, Inc., is currently manufacturing an adapter that has a variable cost of $. 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 $. 60, but sales volume should jump to 50,000 units due to a higher- quality product. Should AudioCables buy the new equipment?

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