AB electronics company is currently producing an item that has a variable cost of IDR 6,000 per unit and a selling price of IDR 12,000 per unit. Fixed costs are IDR 100,000,000. Current volume is 20,000 units. The company can substantially improve product quality by adding new equipment for a fixed additional cost of IDR 50,000,000. Variable costs will increase to IDR 7,500, but volume will increase to 35,000 units due to higher quality products. A. Can the company buy the new equipment? B. If the company is considering purchasing new equipment and increasing the selling price to Rp. 13,000 per unit, should the company purchase new equipment and increase the selling price?
