c. assuming that Adams is considering whether to purchase the new equipment or outsource the bike frame, calculate the impact on profitability between two alternatives.

Adams Bike Company makes the frames used to bulld its bicycles. During Year 2, Adams made 22,000 frames; the costs incurred follow: Adams has an opportunity to purchase frames for \$112 each. Additional Information 1. The manufacturing equipment, which originally cost $560,000, has a book valie of $490,000, 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 $73,000 per year. 2. Adams has the opportunity to purchase for $990,000 new manufacturing equipment that will have an expected useful life of fout 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. 3. If Adams outsources the frames, the company can eliminate 80 percent of the inventory holding costs. Required Q. 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 blke frames? b. 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. c. Assuming that Adams is considerinq whether to purchase the new equipment or outsource the bike frame, calculate the impact on