Problem 13-25 Effects of the level of production on an outsourcing decision LO 13-3 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. Munoz's accountant constructed the following profitability analysis: Revenue (19,000 units x $12.00) Unit-level materials costs (19,000 units $1.20) Unit-level labor costs (19,000 units $0.70) Unit-level overhead costs (19,000 x $0.20) Unit-level selling expenses (19,000 x $0.40) Contribution margin Skin cream production supervisor's salary Allocated portion of facility-level costs Product-level advertising cost Contribution to companywide income $228,000 (22,800) (13,300) (3,800) (7,600) 180,500 (66,00) (13,200) (46,000) $ 55,300 Required a. Identify the cost items relevant to the make-or-outsource decision, b. What is the avoidable cost per unit if the outsourcing decislon is taken? Should Munoz continue to make the product or buy it from the supplier? c. Suppose that Munoz is able to increase sales b 6,000 units (sales will increase to 25.000 units). Calculate the total avoldable costs At this level of production, should Munoz make or buy the cream