Walton Bike Company makes the frames used to build its bicycles. During 2018, Walton made 21,000 frames; the costs incurred follow: Unit-level materials costs (21,000 units x $49) Unit-level labor costs (21,000 units x $56) Unit-level overhead costs (21,000x$11) Depreciation on manufacturing equipment Bike frame production supervisor's salary Inventory holding costs Allocated portion of facility-level costs Total costs $1,029,000 1,176,000 231,000 90,000 93,400 280,000 590,000 $3,489,400 Walton has an opportunity to purchase frames for $120 each. Additional Information 1. The manufacturing equipment, which originally cost $550,000, has a book value of $410,000, a remaining useful life of four years, and a zero salvage value. If the equipment is not used to produce bicycle frames, it can be leased for $76,000 per year. 2. Walton has the opportunity to purchase for $990,000 new manufacturing equipment that will have an expected useful life of four years and a salvage value of $47600. This equipment will increase productivity substantially, reducing unit-level labor costs by 50 percent. Assume that Walton will continue to produce and sell 21,000 frames per year in the future 3. If Walton outsources the frames, the company can eliminate 70 percent of the inventory holding costs. a. Determine the avoidable cost per unit of making the bike frames, assuming that Walton 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 Walton outsource the bike frames? b. Assuming that Walton 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 Walton is considering whether to either purchase the new equipment or outsource the bike frame, calculate Complete this question by entering your answers in the tabs below Required A Required B Required C Determine the avoidable cost per unit of making the bike frames, assuming that Walton 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 Walton outsource the bike frames? (Round your answer to 2 decimal places.) Avoidable cost per unit for making the product Walton should outsource the bike frames? per unit Required A Required B a. Determine the avoidable cost per unit of making the bike frames, assuming that Walton 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 Walton outsource the bike frames? b. Assuming that Walton 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. . Assuming that Walton is considering whether to either purchase the new equipment or outsource the bike frame, calculate Complete this question by entering your answers in the tabs below Required ARequired B Required C Assuming that Walton 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.) Show less Old Equipment New Equipment Avoidable cost per unit Profit must by a. Determine the avoidable cost per unit of making the bike frames, assuming that Walton 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 Walton outsource the bike frames? b. Assuming that Walton 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 Walton is considering whether to either purchase the new equipment or outsource the bike frame, calculate Complete this question by entering your answers in the tabs below Required A Required B Required C Assuming that Walton is considering whether to either purchase the new equipment or outsource the bike frame, calculate. (Do not round intermediate calculations.) Should Walton purchase new equipment or outsource? Profit must by Required B Required C
