Munoz Chemical Company makes a variety of cosmetic products, one of which is a skin cream designed to reduce the signs of aging Munoz produces a relatively small amount (19,000 units) of the cream and is considering the purchase of the product from an outside supplier for $5 10 each If Munoz purchases from the outside supplier, it would continue to sell and distribute the cream under its own brand name Munozs accountant constructed the following profitability analysis Revenue (19,000 units $12 00) $ 228,000 Unit level materials costs (19,000 units $1 20) (22,800 ) Unit level labor costs (19,000 units $0 70) (13,300 ) Unit level overhead costs (19,000 $0 20) (3,800 ) Unit level selling expenses (19,000 $0 40) (7,600 ) Contribution margin 180,500 Skin cream production supervisors salary (66,000 ) Allocated portion of facility level costs (13,200 ) Product level advertising cost (46,000 ) Contribution to company wide income $ 55,300 Required 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 Munoz continue to make the product or buy it from the supplier Suppose that Munoz is able to increase sales by 6,000 units (sales will increase to 25,000 units) Calculate the total avoidable costs At this level of production, should Munoz make or buy the cream Identify the cost items relevant to the make or outsource decision Total avoidable costs What is the avoidable cost per unit if the outsourcing decision is taken Should Munoz continue to make the product or buy it from the supplier (Round your answer to 2 decimal places ) Total avoidable costs per unit Should Munoz continue to make the product or buy it from the supplier Suppose that Munoz is able to increase sales by 6,000 units (sales will increase to 25,000 units) Calculate the total avoidable costs At this level of production, should Munoz make or buy the cream Total avoidable costs At this level of production, should Munoz make or buy the cream

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Munoz Chemical Company makes a variety of cosmetic products, one of which is a skin cream designed to reduce the signs of aging. Munoz produces

Munoz Chemical Company makes a variety of cosmetic products, one of which is a skin cream designed to reduce the signs of aging. Munoz produces a relatively small amount (19,000 units) of the cream and is considering the purchase of the product from an outside supplier for $5.10 each. If Munoz purchases from the outside supplier, it would continue to sell and distribute the cream under its own brand name. Munozs accountant constructed the following profitability analysis:


Revenue (19,000 units $12.00)	$	228,000
Unit-level materials costs (19,000 units $1.20)		(22,800	)
Unit-level labor costs (19,000 units $0.70)		(13,300	)
Unit-level overhead costs (19,000 $0.20)		(3,800	)
Unit-level selling expenses (19,000 $0.40)		(7,600	)
Contribution margin		180,500
Skin cream production supervisors salary		(66,000	)
Allocated portion of facility-level costs		(13,200	)
Product-level advertising cost		(46,000	)
Contribution to company-wide income	$	55,300

Required

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 Munoz continue to make the product or buy it from the supplier?
Suppose that Munoz is able to increase sales by 6,000 units (sales will increase to 25,000 units). Calculate the total avoidable costs. At this level of production, should Munoz make or buy the cream?

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Identify the cost items relevant to the make-or-outsource decision. Total avoidable costs What is the avoidable cost per unit if the outsourcing decision is taken? Should Munoz continue to make the product or buy it from the supplier? (Round your answer to 2 decimal places.) Total avoidable costs per unit Should Munoz continue to make the product or buy it from the supplier? Suppose that Munoz is able to increase sales by 6,000 units (sales will increase to 25,000 units). Calculate the total avoidable costs. At this level of production, should Munoz make or buy the cream? Total avoidable costs At this level of production, should Munoz make or buy the cream