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Check my Problem 6-26A (Algo) Effects of the level of production on an outsourcing decision LO 6-3 points Campbell Chemical Company makes a variety of cosmetic products, one of which is a skin cream designed to reduce the signs of aging. Campbell produces a relatively small amount (19,000 units) of the cream and is considering the purchase of the product from an outside supplier for $4.90 each. If Campbell purchases from the outside supplier, it would continue to sell and distribute the cream under its own brand name. Campbell's accountant constructed the following profitability analysis: Skipped eBook Revenue (19,000 units x $12.00) Unit-level materials costs (19,000 units X $1.40) Unit-level labor costs (19,000 units X $0.90) Unit-level overhead costs (19,000 x $0.50) Unit-level selling expenses (19,000 X $0.20) Contribution margin Skin cream production supervisor's salary Allocated portion of facility-level costs Product-level advertising cost Contribution to company-wide income $228,000 (26,600) (17,100) (9,500) (3,800) 171,000 (46,000) (12,300) (38,000) $ 74,700 Ask References 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 Campbell continue to make the product or buy it from the supplier? c. Suppose that Campbell is able to increase sales by 10,000 units (sales will increase to 29,000 units). Calculate the total avoidable costs. At this level of production, should Campbell make or buy the cream? Complete this question by entering your answers in the tabs below. Required A Required B Required C Identify the cost items relevant to the make-or-outsource decision. Total avoidable costs Required A Required B > Complete this question by entering your answers in the tabs below. erences Required A Required B Required C What is the avoidable cost per unit if the outsourcing decision is taken? Should Campbell continue to make the product or buy it from the supplier? (Round your answer to 2 decimal places.) per unit Total avoidable costs Should Campbell continue to make the product or buy it from the supplier? CUJL3. ALLIIIJIVCI VIPIUUULLIUI, JUUUULUTUI TUNC VI uy LIIC LICU! Ask Complete this question by entering your answers in the tabs below. References Required A Required B Required C Suppose that Campbell is able to increase sales by 10,000 units (sales will increase to 29,000 units). Calculate the total avoidable costs. At this level of production, should Campbell make or buy the cream? Total avoidable costs At this level of production, should Campbell make or buy the cream?
