Zachary Chemical Company makes a variety of cosmetic products, one of which is a skin cream designed to reduce the signs of aging. Zachary produces a relatively small amount (14,000 units) of the cream and is considering the purchase of the product from an outside supplier for $6.10 each. If Zachary purchases from the outside supplier, it would continue to sell and distribute the cream under its own brand name. Zacharys accountant constructed the following profitability analysis:

Required Identify the cost items relevant to the make-or-outsource decision.

Total avoidable costs: ?

Revenue (14,000 units x $12.50) Unit-level materials costs (14,000 units x $1.20) Unit-level labor costs (14,000 units x $0.60) Unit-level overhead costs (14,000 x $0.50) Unit-level selling expenses (14,000 x $0.40) Contribution margin Skin cream production supervisor's salary Allocated portion of facility-level costs Product-level advertising cost Contribution to company-wide income $175,000 (16,800) (8,400) (7,000) (5,600) 137,200 (64,000) (13, 100) (46,000) $ 14,100