Rooney Bike Company makes the frames used to build its bicycles. During year 2, Rooney made 25,000 frames; the costs incurred follow. Rooney has an opportunity to purchase frames for $115 each. Additional Information 1. The manufacturing equipment, which originally cost $510,000, has a book value of $480,000, a remaining useful life of 5 years, and a zero salvage value. If the equipment is not used to produce bicycle frames, it can be leased for $68.000 per year. 2. Rooney has the opportunity to purchase for $940,000 new manufacturing equipment that will have an expected useful life of 5 years and a salvage value of $37,500. This equipment will increase productivity substantially, reducing unit-level labor costs by 60 percent. Assume that Rooney will continue to produce and sell 25,000 frames per year in the future. 3. If Rooney outsources the frames, the company can eliminate 90 percent of the inventory holding costs: Required a. Determine the avoidable cost per unit of making the bike frames, assuming that Rooney is considering the alternatives of making the product using the existing equipment or outsourcing the product to the independent contractor. Based on the quantitative data, should Rooney outsource the bike frames? b. Assuming that Rooney is considering whether to replace the old equipment with the new equipment, determine the avoidable cost per unit to produce the bike frames using the new equipment and the avoidable cost per unit to produce the bike frames using the old equipment. Calculate the increase or decrease in the company's profit if the company uses new equipment. c. Assuming that Rooney is considering whether to elther purchase or outsource, calculate the impact on profitability between the two alternatives. Complete this question by entering your answers in the tabs below. a. Determine the avoidable cost per unit of making the bike frames, assuming that Rooney is considering the alternatives of mak the product using the existing equipment or outsourcing the product to the independent contractor. Based on the quantitative should Rooney outsource the bike frames? b. Assuming that Rooney is considering whether to replace the old equipment with the new equipment, determine the avoidable per unit to produce the bike frames using the new equipment and the avoidable cost per unit to produce the bike frames using old equipment. Calculate the increase or decrease in the company's profit if the company uses new equipment. c. Assuming that Rooney is considering whether to elther purchase or outsource, calculate the impact on profitability between th alternatives. Complete this question by entering your answers in the tabs below. Determine the avoidable cost per unit of making the bike frames, assuming that Rooney is considering the alternatives of making the product using the existing equipment or outsourcing the product to the independent contractor. Based on the quantitative data, should Rooney outsource the bike frames? (Round your answer to 2 decimal places.) Complete this question by entering your answers in the tabs below. Assuming that Rooney is considering whether to replace the old equipment with the new equipment, determine the avoidable cost per unit to produce the bike frames using the new equipment and the avoidable cost per unit to produce the bike frames using the old equipment. Calculate the increase or decrease in the company's profit if the company uses new equipment. (Round "Avoidable cost per unit" to 2 . decimal places.) Assuming that Rooney is considering whether to either purchase or outsource, calculate the impact on profitabilit the two alternatives. (Do not round intermediate calculations.)
