Fanning Chemical Company makes a variety of cosmetic products, one of which is a skin cream designed to reduce the signs of aging Fanning produces a relatively small amount (17,000 units) of the cream and is considering the purchase of the product from an outside supplier for $4.60 each. If Fanning purchases from the outside supplier it would continue to sell and distribute the cream under its own brand name. Fanning's accountant constructed the following profitability analysis: Revenue (17,000 units x $11.00) Unit-level materials costs (17,000 units * $1.58) Unit-level labor costs (17,000 units * $0.40) Unit-level overhead costs (17,000 $0.60) Unit-level selling expenses (17,000 $0.20) Contribution margin Skin crean production supervisor's salary Allocated portion of facility-level costs Product-level advertising cost Contribution to company-wide Income $187,000 (25,500) (6,800) (10,200) (3,400) 141, 100 (52,000) (12, 100) (37,000) 540,000 Required a. Identify the cost items relevant to the make-or-outsource decision b. What is the avoidable cost per unit of the outsourcing decision is taken? Should Fanning continue to make the product or buy it from c. Suppose that Fanning is able to increase sales by 13,000 units (sales will increase to 30,000 units). Calculate the total avoidable costs. At this level of production, should Fanning make or buy the cream? Complete this question by entering your answers in the tabs below. Required A Required B Required Identify the cost items relevant to the make-or-outsource decision. Tot avaldable costs equired Identify the cost items relevant to the make-or-outsource decision. What is the avoidable cost per unit if the outsourcing decision is taken? Should Fanning continue to make the product or the supplier? Suppose that Fanning is able to increase sales by 13,000 units (sales will increase to 30,000 units). Calculate the total av costs. At this level of production, should Fanning make or buy the cream? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the avoidable cost per unit if the outsourcing decision is taken? Should Fanning continue to make the product or buy it from the supplier? (Round your answer to 2 decimal places.) per unit Total avoidable costs Should Fanning continue to make the product or buy it from the supplier? Required a. Identify the cost items relevant to the make-or-outsource decision. b. What is the avoidable cost per unit if the outsourcing decision is taken? Should Fanning continue to make the product the supplier? c. Suppose that Fanning is able to increase sales by 13,000 units (sales will increase to 30,000 units). Calculate the total a costs. At this level of production, should Fanning make or buy the cream? Complete this question by entering your answers in the tabs below. Required A Required B Required C Suppose that Fanning is able to increase sales by 13,000 units (sales will increase to 30,000 units). Calculate the total avoidable costs. At this level of production, should Fanning make or buy the cream? Total avoidable costs At this level of production, should Fanning make or buy the cream?
