Kendra's Quilts makes custom baby quilts embroidered with the baby's name and date of birth. The company is considering the purchase of a new embroidery machine that costs $75,000. The increased efficiency of the new machine would allow the company to increase revenue by 50%, from $250,000 to $375,000 annually. Direct labor costs would increase by $15,000, and fixed costs (not including depreciation on the machine) would increase by $12,500. Factory rent is $12,000 per year. Should the company purchase the machine?
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