Answer:
No.
Explanation:
Current profit of AudioCables, Inc without buying new equipment
Current Profit = Current sales volume * Selling price per unit - Fixed cost - Current sales volume * Variable cost per unit
= 30,000 * $1.00 - $14,000 - 30,000 * $0.50
= $30,000 - $14,000 - $15,000
= $1,000
So, the current profit of AudioCables, Inc., without buying new equipment is $1,000
Proposed profit of AudioCables, Inc after buying new equipment
Proposed Profit = Proposed sales volume * Selling price per unit – Fixed cost after buying new equipment - Proposed sales volume * Variable cost per unit after buying new equipment
= 50,000 * $1.00 - $20,000 – 50,000 * $0.60
= $50,000 - $20,000 - $30,000
= $0
So, the proposed profit of AudioCables, Inc., after buying new equipment is $0
Conclusion: As the profit of AudioCables, Inc., will reduce after buying new equipment from $1,000 to $0, therefore AudioCables should not buy the new equipment.
