AudioCables, Inc., is currently manufacturing an adapter that has a variable cost of $0.50 per unit and a selling price of $1.40
per unit. Fixed costs are $14,000. Current sales 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 $6,000. Variable costs would increase to $0.75, but sales volume should jump to 50,000 units due to a higher-quality product. What is the current profit and proposed profit of the sales of AudioCable?
Equity theory of motivation states that individuals are motivated by fairness. People identify inequality between them and others and take action to make the situation fair in their eyes.
In this instance, you are putting more effort and getting lower results. While your roommate is doing less and getting better results. You will fee this is not fair and will not feel motivated.