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River Valley Incorporated ( RVI ) currently grows the grapes used in producing its record - breaking wines. The company currently produces and sells 2

River Valley Incorporated (RVI) currently grows the grapes used in producing its record-breaking wines. The company currently produces and sells 23,800 bottles of wine per year. Due to changing weather conditions in the region, RVI is considering purchasing its grapes from an outside supplier. RVI located a supplier that is willing to grow the grapes to the same level of quality for $16 per bottle. Regardless of RVIs decision, the company will continue to be responsible for all marketing and selling of its products. RVI is currently spending $21 per bottle for grapes, which is made up of the following:
Item Unit Cost
Growing materials $6
Farm labor 5
Indirect growing materials 1
Advertising cost 9
Total unit cost $21
Required
Calculate the avoidable cost per unit. Should RVI continue to produce its own grapes or purchase the grapes from an outside supplier?

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