Freedom Company manufactures medical scooters for people who need assistance in mobility. Facing rising utilities expenses and labour costs, Freedom is contemplating outsourcing the production of one of its product lines, FreeMe. Currently, Freedom makes 3,000 units of FreeMe annually. The cost structure for one unit of FreeMe is as follows:

Direct Materials........................................... $150
 Direct Labour................................................. 180
 Variable Overhead.......................................... 50
 Fixed Overhead............................................. 120

Freedom’s cost accountant analyzed the fixed overhead and found that several overhead costs are allocated to FreeMe at a rate of 40% of the total of each overhead cost. Freedom’s total corporate fixed overhead costs consist of Testing & Inspection, $120,000; Design & Engineering, $180,000; Rent (Factory), $105,000; and Machine-Related Costs, $420,000. In addition, Freedom pays $30,000 per year to rent a warehouse to store the finished product before shipping to customers.
 A Chinese manufacturer offers to produce FreeMe at $450 per unit. A further study of the fixed overhead costs finds that once FreeMe is outsourced, FreeMe will no longer incur the costs for Testing & Inspection. Freedom will be able to reduce the Design & Engineering cost by half, and thus the cost saving will be passed on to FreeMe.
 The space and machine used for making FreeMe will be freed up to produce other product. However, there is no demand to increase the production of other product lines.

REQUIRED

A. Calculate the total cost per unit for FreeMe.
 B. Should Freedom outsource FreeMe? Show calculations to support your answer.
 C. Suppose there is a demand for other product lines, and the Rent – Factory and Machine related costs allocated to FreeMe now can be allocated to another product line. Should Freedom outsource FreeMe?