Jordan Bike Company makes the frames used to build its bicycles. During year 2, Jordan made 25,000 frames, the costs incurred follow Unit-level materials costs (25,000 units x $51) Unit-level labor costs (25,000 units x $52) Unit-level overhead costs (25,000 x $10) Depreciation on manufacturing equipment Bike frame production supervisor's salary Inventory holding costs Allocated portion of facility-level costs Total costs $1,275,000 1,300,000 250,000 91,000 64,000 390,000 510,000 $3,880,000 Jordan has an opportunity to purchase frames for $116 each. Additional Information 1. The manufacturing equipment, which originally cost $590,000, has a book value of $470,000, 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 $79,000 per year. 2. Jordan has the opportunity to purchase for $920,000 new manufacturing equipment that will have an expected useful life of 5 years and a salvage value of $50,000. This equipment will increase productivity substantially, reducing unit-level labor costs by 50 percent. Assume that Jordan will continue to produce and sell 25.000 frames per year in the future. 3. If Jordan outsources the frames, the company can eliminate 80 percent of the inventory holding costs. Required a. Determine the avoidable cost per unit of making the bike frames, assuming that Jordan 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 Jordan outsource the bike frames? b. Assuming that Jordan 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 Jordan is considering whether to either purchase or outsource, calculate the impact on profitability between the two alternatives. Complete this question by entering your answers in the tabs below. Required A Required B Required C Determine the avoidable cost per unit of making the bike frames, assuming that Jordan 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 Jordan outsource the bike frames? (Round your answer to 2 decimal places.) per unit Avoidable cost per unit for making the product Should Jordan outsource the bike frames? Complete this question by entering your answers in the tabs below. Required A Required B Required C Assuming that Jordan is considering whether to either purchase or outsource, calculate the impact on profitability between the two alternatives. (Do not round intermediate calculations.) Should Jordan purchase new equipment or outsource? Profit must - by
