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Munoz Bike Company makes the frames used to build its bicycles. During 2018 Munoz made 26 000 frames, the costs incurred follow Unit-level materials costs (26,000 units X $50) Unit-level labor costs (26,000 units X $53) Unit-level overhead costs (26,080 x $9) Depreciation on manufacturing equipment Bike frame production supervisor's salary Inventory holding costs Allocated portion of facility-level costs Total costs $1,500,000 1978,000 254 000 98eee 55,800 80,000 490 000 $3,930,800 Munoz has an opportunity to purchase frames for $114 each Additional Information 1. The manufacturing equipment, which originally cost $580.000 has a book value 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 $76.000 per year. 2. Munoz has the opportunity to purchase for $1.020.000 new manufacturing equipment that will have an expected useful life of four years and a salvage value of $40 000 This equipment will increase productivity substantially, reducing unit-level labor costs by 60 percent. Assume that Munoz will continue to produce and sell 26.000 frames per year in the future 3. If Munoz outsources the frames, the company can eliminate 70 percent of the inventory holding costs Required a. Determine the avoidable cost per unit of making the bike frames, assuming that Munoz 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 Munoz outsou the bike frames? b. Assuming that Munoz 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 Munoz is considering whether to either purchase the new equipment or outsource the bike frame calculate. Required A Required B Required c Assuming that Munoz 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. (Round "Avoidable cost per unit" to 2 decimal places.) Show less Avoidable cost per unit Profit must Old Equipment New Equipment $ 55.92 increase by Required A Required B Required Assuming that Munoz is considering whether to either purchase the new equipment or outsource the bike frame, calculate. (Do not round intermediate calculations.) Purchase Should Munoz purchase new equipment or outsource? Profit must increase by