Louis Company Sells a Single Product at a Price of $65

question 126

Essay

Louis Company sells a single product at a price of $65 per unit. Variable costs per unit are $45 and total fixed costs are $625,500. Louis is considering the purchase of a new piece of equipment that would increase the fixed costs to $800,000, but decrease the variable costs per unit to $42.
Required:
If Louis Company expects to sell 44,000 units next year, should they purchase this new equipment?

---

Definitions:

Satisfaction Rating

A measurement that captures how products, services, or experiences meet or surpass the expectations of the user or customer.

Positive Correlation

A relationship between two variables where both variables move in the same direction.

Negative Correlation

A relationship between two variables in which one variable increases as the other decreases, and vice versa.

Alcohol Consumption

The act of drinking beverages that contain ethanol, which can have varying effects on health and behavior depending on the amount and frequency of consumption.