1. An electronics firm is currently manufacturing an item that has a variable co

1.
An electronics firm is currently manufacturing
an item that has a variable cost of $.50 per unit and a selling price of $1.00
per unit. Fixed costs are $14000. The current volume is 30000 units and the
process has been optimized such that no additional improvements are possible
given the equipment and materials available. The firm can improve the product
quality of this item by adding a new piece of equipment at an additional fixed
cost of $6000.The new variable cost
would be $.60 however as a result of the improved quality; marketing believes
the company will sell 50000 units.