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2 Problem 13-25 Effects of the level of production on an outsourcing decision LO 13-3 Finch Chemical Company makes a variety of cosmetic products, one of which is a skin cream designed to reduce the signs of aging Finch produces a relatively small amount (19,000 units) of the cream and is considering the purchase of the product from an outside supplier for $510 each. If Finch purchases from the outside supplier, it would continue to sell and distribute the cream under its own Onts saipoedbrand name. Finch's accountant constructed the following profitability analysis Revenve (13,000 unita $31.50 Unit-level naterials costs (19,000 units $1.60) Unit-level labor costs (19,000 unitsO.S0) Unit-level ovezhead coats (19,000$0.10 Unit-level selling expenses (19,000c0.10) (30, 400 (9, 500) (1,900) Contribution nargin 174, B00 (62. 000 (31,600) (42,000) Skin aream produetion supervisor s salaryY Print Ailocated portion ot taciiiey-level coa Prodact-level advertising cost Contribution so conpanwsde hcome s s6, 200 Required o. Identify the cost items relevant to the make-or-outsource decision b. What is the avoidable cost per unit if the outsourcing decision is taken? Should Finch continue to make the product or buy it from the supplier? c. Suppose that Finch is able to increase sales by 5,000 units (sales wil increase to 24,000 units) Calculate the total avoidable costs. At this level of production, should Finch make or buy the cream? Complete this question by entering your answers in the tabs below Required ARequred 8 Required C Identify the cost items relevant to the make-or-outsource decision. Required 8 >

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