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Unformatted text preview: m 714 Learning Objective: 0703 Analyze
simple manufacturing processes. Problem 7-14
AudioCables , Inc ., is c urrently manufac turing an adapter that has a v ariable c os t of $0.60 per unit and a
s elling pric e of $1.20 per unit. Fix ed c os ts are $14,000. Current s ales v olume is 30,000 units . The firm c an
s ubs tantially improv e the produc t quality by adding a new piec e of equipment at an additional fix ed c os t of
$6,000. Variable c os ts would inc reas e to $0.75, but s ales v olume s hould jump to 50,000 units due to a
higherquality produc t.
a. What is the c urrent profit and propos ed profit of the s ales of AudioCables ? (Negative am ounts should
be indicated by a m inus sign.) Current profit Propos ed profit $ $ 4,000 2,500 b. Should AudioCables buy the new equipment? No Explanation: To ans wer this ques tion y ou need to c ompute the profit of eac h s ituation and c hoos e the one with the
higher profit. Profit equals total rev enue minus total c os ts . 8. awar d: 0.50 out of
0.50 points http://e z to.mhe c loud.mc gr a w- hill.c om/hm.tpx? todo= pr intvie w 8/10 1/29/2014 Assignme nt Pr int V...
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This note was uploaded on 01/29/2014 for the course MAN 4504 taught by Professor Georgekyparisis during the Fall '09 term at FIU.
- Fall '09