Consider the same electronics firm from question 3 above. Knowing that they can sell each piece for $1.00, and that their annual fixed cost of production is $14,000, they have projected sales to be 30,000 pieces for this year. However, the firms manufacturing engineer has made a proposal that would improve product quality (yield) by adding a new piece of equipment (a bolt-on to the existing machine) that would cost the firm an additional $6,000 per year of fixed cost to run the machine. With this new piece of equipment, the new variable cost per piece becomes $0.60 and projected sales would jump to 50,000 pieces per year due to higher quality.

1. Do you think the firm should buy the new piece of equipment suggested by the manufacturing engineer? You must explain/show/prove your reasoning with valid data (calculations) to obtain marks on this question.