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 it purchase this new equipment?

Question

Required
If Louis Company expects to sell 44,000 units next year, should it purchase this new equipment?

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The Answer of 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 it purchase this new equipment?

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