Should the company buy the new equipment

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An electronics firm is currently manufacturing an item that has a variable cost of $0.40 per unit and a selling price of $1.20 per unit. Fixed costs are $15,000. Current volume is 40,000 units. The firm can substantially improve the product quality by adding a new piece of equipment at an additional fixed cost of $8,000. Variable cost would increase to $0.60, but volume should jump to 30,000 units due to a higher quality product. Should the company buy the new equipment

Reference no: EM131142798

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