per year The company, however, is still Ray Summers Company operates at full capacity of 10,460 units per year The company unable to fully meet the demand for its product, estimated at 15,000 units annually. This level of demano is expected to continue for at least another four years. 80,000. This To meet the demand, the firm is considering the purchase of new equipment for $5 cquipment has an estimated useful life of 4 years; estimated sales (disposal) value of this asset at the end of 4 years is $50,000 (pretax) The engineering division estimates that installing, testing, and training for the use of the equipment will cost $12,000. These costs are to be capitalized as part of the cost of new equipment. An adjacent vacant warehouse can be leased for the duration of the project for $10,000 per yean cost would be included as part of fixed manufacturing overhead. The warehouse needs renovations to make it suitable for manufacturing. The renovation cost is to be capitalized as part of the $58,000 of cost of the new equipment. The lease terms call for restoring the warehouse to its original condition at the end of the lease. The restoration is estimated to cost $20,000, a cost that is fully deductible for tax purposes. Current pretax operating profit per unit is as follows: Per Unit s 220 Sales price Variable costs: s 66 Manufacturing Marketing 22 $ 88 Fixed costs: Manufacturing s 25