Complete this question by entering your answers in the tabs below.Required ARequired BRequired CDetermine the avoidable cost per unit of making the bike frames, assuming that Sturdy is considering the alternatives ofmaking the product using the existing equipment or outsourcing the product to the independent contractor. Based on thequantitative data, should Sturdy outsource the bike frames? (Round your answer to 2 decimal places.)Avoidable cost per unit for making the productper unitShould Sturdy outsource the bike frames?Yes< Required ARequired B> Sturdy Bike Company makes the frames used to build its bicycles. During year 2, Sturdy made 20,000 frames; the costs incurredfollow.Unit-level materials costs (20,000 units x $35.00)Unit-level labor costs (20,000 units × $42.50)Unit-level overhead costs (20,000 × $10.00)Depreciation on manufacturing equipmentBike frame production supervisor's salaryInventory holding costsAllocated portion of facility-level costs$700,000850,000200,000120,00070,000290,000500,000Total costs$2,730,000Sturdy has an opportunity to purchase frames for $92.50 each.Additional Information1. The manufacturing equipment, which originally cost $550,000, has a book value of $450,000, a remaining useful life of four years,and a zero salvage value. If the equipment is not used to produce bicycle frames, it can be leased for $70,000 per year.2. Sturdy has the opportunity to purchase for $910,000 new manufacturing equipment that will have an expected useful life of fouryears and a salvage value of $70,000. This equipment will increase productivity substantially, reducing unit-level labor costs by 60percent. Assume that Sturdy will continue to produce and sell 20,000 frames per year in the future.3. If Sturdy outsources the frames, the company can eliminate 80 percent of the inventory holding costs.Requireda. Determine the avoidable cost per unit of making the bike frames, assuming that Sturdy is considering the alternatives of making theproduct using the existing equipment or outsourcing the product to the independent contractor. Based on the quantitative data,should Sturdy outsource the bike frames?b. Assuming that Sturdy is considering whether to replace the old equipment with the new equipment, determine the avoidable costper unit to produce the bike frames using the new equipment and the avoidable cost per unit to produce the bike frames using theold equipment. Calculate the increase or decrease in the company's profit if the company uses new equipment.c. Assuming that Sturdy is considering whether to either purchase or outsource, calculate the impact on profitability between the twoalternatives.

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Description: Complete this question by entering your answers in the tabs below.Required ARequired BRequired CDetermine the avoidable cost per unit of making the bike frames, assuming that Sturdy is considering the alternatives ofmaking the product using the exis

Avoidable cost refers to those cost of the company which is eliminated or not incurred when a…

Business

Accounting

Required a. Determine the avoidable cost per unit of making the bike frames, assuming that Sturdy is considering the alternatives of making the product using the existing equipment or outsourcing the product to the independent contractor. Based on the quantitative data, should Sturdy outsource the bike frames? b. Assuming that Sturdy is considering whether to replace the old equipment with the new equipment, determine the avoidable cost per unit to produce the bike frames using the new equipment and the avoidable cost per unit to produce the bike frames using the old equipment. Calculate the increase or decrease in the company's profit if the company uses new equipment. c. Assuming that Sturdy is considering whether to either purchase or outsource, calculate the impact on profitability between the two alternatives.

Required a. Determine the avoidable cost per unit of making the bike frames, assuming that Sturdy is considering the alternatives of making the product using the existing equipment or outsourcing the product to the independent contractor. Based on the quantitative data, should Sturdy outsource the bike frames? b. Assuming that Sturdy is considering whether to replace the old equipment with the new equipment, determine the avoidable cost per unit to produce the bike frames using the new equipment and the avoidable cost per unit to produce the bike frames using the old equipment. Calculate the increase or decrease in the company's profit if the company uses new equipment. c. Assuming that Sturdy is considering whether to either purchase or outsource, calculate the impact on profitability between the two alternatives.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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