Perez Chemical Company makes a variety of cosmetic products, one

of which is a skin cream designed to reduce the signs of aging.

Perez produces a relatively small amount $(18,000$ units$)$ of the

cream and is considering the purchase of the product from an

outside supplier for $$5\mathrm{.}20$ each. If Perez purchases from the

outside supplier, it would continue to sell and distribute the

cream under its own brand name. Perez$$s accountant constructed the

following profitability analysis:

$$

RequiredIdentify the cost items relevant to the make$-$or$-$outsource

decision.What is the avoidable cost per unit if the outsourcing decision

is taken?$$Should Perez continue to make the product or buy it

from the supplier?Suppose that Perez is able to increase sales by$8,000$ units

$($sales will increase to $26,000$ units$).$ Calculate the total

avoidable costs. At this level of production, should Perez make or

buy the cream?