A logistics firm, Apao Cargo, Inc., 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? Why?
A logistics firm, Apao Cargo, Inc., 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? Why?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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4. A logistics firm, Apao Cargo, Inc., 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? Why?
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