An electronics firm is currently manufacturing an item that has a variable cost of 25Php/unit and a selling price of 50Php/unit. Fixed costs are 700,000Php. Current 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 300,000Php. Variable cost would increase to 30Php/unit but volume should jump to 50,000 units due to a higher-quality product. Should the company buy the new equipment? a. Yes, because it will gain a profit of 50,000Php. b. Yes, because it will gain a profit of 250,000Php c. No, because it will gain a loss of 100,000Php d. No, because it will not gain anything. e. None of the above
1. An electronics firm is currently manufacturing an item that has a variable cost of 25Php/unit and a
selling price of 50Php/unit. Fixed costs are 700,000Php. Current 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 300,000Php. Variable cost would increase to 30Php/unit but volume should jump to
50,000 units due to a higher-quality product. Should the company buy the new equipment?
a. Yes, because it will gain a profit of 50,000Php.
b. Yes, because it will gain a profit of 250,000Php
c. No, because it will gain a loss of 100,000Php
d. No, because it will not gain anything.
e. None of the above
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