Problem 13-29 Outsourcing decision affected by equipment replacement LO 13-3, 13-5 Fanning Bike Company makes the frames used to build its bicycles. During 2018, Fanning made 21.000 frames: the costs incurred follow Unit-level materials costs (21,000 units $48) Unit-level labor costs (21,000 units $50) Unit-level overhead costs (21,000 $13) Depreciation on manufacturing equipment Bike frame production supervisor's salary Inventory holding costs Allocated portion of tacility-level costs Total costs $1,008,000 1,050,000 273,000 94,000 82,300 250,000 500,000 $3,257,300 Fanning has an opportunity to purchase frames for $115 each Additional Information 1. The manufacturing equipment, which originally cost $500.000, has a book value of $420,000, a remaining useful life of eight years, and a zero salvage value. If the equipment is not used to produce bicycle frames, it can be leased for $60,000 per year. 2. Fonning has the opportunity to purchase for $920,000 new manufacturing equipment that will have an expected useful life of six years and a salvage value of $93,800. This equipment will increase productivity substantially, reducing unit-level labor costs by 60 percent. Assume that Fanning will continue to produce and sell 21,000 frames per year in the future 3. If Fanning 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 Fanning is considering the alternatives of making