Cruger Bike Company (CBC) makes the frames used to build its bicycles. During 2014, CBC made 23,000 frames; the costs incurred follow.

Unit-level materials costs (23,000 units $46)	$	1,058,000
Unit-level labor costs (23,000 units $54)		1,242,000
Unit-level overhead costs (23,000 $13)		299,000
Depreciation on manufacturing equipment		98,000
Bike frame production supervisors salary		71,200
Inventory holding costs		290,000
Allocated portion of facility-level costs		560,000
Total costs	$	3,618,200

CBC has an opportunity to purchase frames for $111 each.

Additional Information
1.	The manufacturing equipment, which originally cost $530,000, has a book value of $450,000, a remaining useful life of 5 years, and a zero salvage value. If the equipment is not used to produce bicycle frames, it can be leased for $74,000 per year.
2.	CBC has the opportunity to purchase for $870,000 new manufacturing equipment that will have an expected useful life of 5 years and a salvage value of $40,000. This equipment will increase productivity substantially, reducing unit-level labor costs by 60 percent. Assume that CBC will continue to produce and sell 23,000 frames per year in the future.
3.	If CBC outsources the frames, the company can eliminate 80 percent of the inventory holding costs.

Required

a-1.

Determine the avoidable cost per unit of making the bike frames, assuming that CBC is considering the alternatives of making the product using the existing equipment or outsourcing the product to the independent contractor. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

a-2.

Should CBC outsource the bike frames?

	Yes
	No

b-1.

Assuming that CBC 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. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

b-2.	Calculate the increase or decrease in the company's profit if the company uses new equipment. (Do not round intermediate calculations.)

c-1.

Should CBC purchase new equipment or outsource?

	Purchase
	Outsource

c-2.	Based on the above answer, calculate the increase or decrease in the company's profit. (Do not round intermediate calculations.)