Adams Bike Company makes the frames used to build its bicycles During 2018, Adams made 22,000 frames the costs incurred follow Adams has an opportunity to purchase frames for $112 each Additional Information The manufacturing equipment, which originally cost $560,000, has a book value of $490,000, a remaining useful life of five years, and a zero salvage value If the equipment is not used to produce bicycle frames, it can be leased for $73,000 per year Adams has the opportunity to purchase for $990,000 new manufacturing equipment that will have an expected useful life of five years and a salvage value of $20,000 This equipment will increase productivity substantially, reducing unit level labor costs by 50 percent Assume that Adams will continue to produce and sell 22,000 frames per year in the future If Adams outsources the frames, the company can eliminate 80 percent of the inventory holding costs Required Determine the avoidable cost per unit of making the bike frames, assuming that Adams 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 Adams outsource the bike frames Assuming that Adams 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 Assuming that Adams is considering whether to either purchase the new equipment or outsource the bike frame, calculate Unit level materials costs (22,88e units x $45) Unit level labor costs (22,600 units x $5e) Unit level overhead costs (22,000 x $10) Depreciation on manufacturing equipment Bike frame production supervisor's salary Inventory holding costs Allocated portion of facility level costs Total costs $ 990,000 1,100,000 220,000 85,000 92,000 330,000 520,000 $3,337,000

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Adams Bike Company makes the frames used to build its bicycles. During 2018, Adams made 22,000 frames; the costs incurred follow: Adams has an opportunity

Adams Bike Company makes the frames used to build its bicycles. During 2018, Adams made 22,000 frames; the costs incurred follow:

Adams has an opportunity to purchase frames for $112 each.

Additional Information

The manufacturing equipment, which originally cost $560,000, has a book value of $490,000, a remaining useful life of five years, and a zero salvage value. If the equipment is not used to produce bicycle frames, it can be leased for $73,000 per year.
Adams has the opportunity to purchase for $990,000 new manufacturing equipment that will have an expected useful life of five years and a salvage value of $20,000. This equipment will increase productivity substantially, reducing unit-level labor costs by 50 percent. Assume that Adams will continue to produce and sell 22,000 frames per year in the future.
If Adams outsources the frames, the company can eliminate 80 percent of the inventory holding costs.

Required

Determine the avoidable cost per unit of making the bike frames, assuming that Adams 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 Adams outsource the bike frames?
Assuming that Adams 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.
Assuming that Adams is considering whether to either purchase the new equipment or outsource the bike frame, calculate.

Unit-level materials costs (22,88e units x $45) Unit-level labor costs (22,600 units x $5e) Unit-level overhead costs (22,000 x $10) Depreciation on manufacturing equipment Bike frame production supervisor's salary Inventory holding costs Allocated portion of facility-level costs Total costs $ 990,000 1,100,000 220,000 85,000 92,000 330,000 520,000 $3,337,000