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4 Problem 13-29 Outsourcing decision affected by equipment replacement LO 13-3, 13-5 Thornton Bike Company makes the frames used to build ins bicycles During 2018, Thornton made 23,000 frames, the costs incurred follow Unit-level materlals costs t23,00D nite $46 Dait-level labor costs 123,000 units 54) 1,058,000 1,242,000 299,000 98,000 71,200 290,000 unit-lev,1 overhead coat, (23,000 $13) Bike Erame prodactien agerve's salaty ementory holding cots Allecated portion of facality-level costs Print 3,610,200 Thomton has an opportunity to purchase frames for S11 each Additional Information 1. The manufacturing equipment, which originally cost $530000, has a book value of $450,000, a remaining uselul life of five years, and a zero savage value. If the equipment is not used to prod 2. Thomon has equipment is not used to produce bicycle frames, it can be leased for $74.000 per year has the opportunity to purchese for years and a salvage value of $40,000 This equipment w percent Assume that Thomton will cortinue to produce and sel 23,000 frames per year in $870000 new manufacturing equipment that will have an expected useful Me of five l increase productivity substantially, reducing unit-level labor costs by 60 3. Il Thoenton ousources 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 Thomton i considesing the altematives of making the product using the existing equipment or outsourcing the product to the independent contractor Based on the qusndfative data should Thomton outsource the bike frames b. Assuming that Thormton is consdering whether to replace the old equipment with the new eqipment, determine the avoidable cot per unit to produce the bike frames using the new equsipment and the avoidable cost per unit to produce the bike frames using the old equpment Calculate the increase or decrease in the company's proft the company uses new equipment c. Asssuning that Themton is considening whether to esther purchase the new equipment or outseurce the bike frame, calculate Complote this question by entering your answers in the tabs below Detenmine the avoidable cost per unit of making the bike tanes, amaing that Thomten is cennidering the altematives of maing the product ninng the esstng eqipment o outsourong the prodhct to the ndepeydent cony actor Based on the

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