XYZ plating makes a product where fixed costs are $7,500 per year and it has a variable cost of $30 per unit. It can make 400 units a year and sell them for $100 each.
A vendor is trying to sell them some replacement equipment. With the replacement equipment, XYZ will have a fixed cost of $7,000 per year and a variable cost of $30 per unit. It will be able to make 250 units per year selling at $175 per unit. What is the profit (or loss) using the replacement equipment? Will the new process make more money for the company? describe your answer