Company Axis is considering the addition of purchasing new equipment in one of its production departments. They currently produce 50,000 units a year with average unit costs of $50 for direct materials, $30 for direct labor (2 hours @ 15 per hour) and $20 for fixed overhead. Both direct materials and direct labor are variable costs. The ratio of unit fixed costs to unit variable costs (direct materials plus direct labor) is currently 25% ($20 $80). The new equipment will increase total fixed overhead costs in the department by $500,000 per year which will make production more capital-intensive. With this production will be doubled to 100,000 units a year using the same total number of direct labor hours per year as with the current equipment. Direct materials cost will be unchanged ($50.) Which of the following would be the predicted ratio of unit fixed costs to unit variable costs if the new equipment is purchased.

A. 15.38%

B. 23.08%

C. 18.75%

D. 30.77%