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?

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