Required:

a$.$Determine the avoidable cost per unit of making the bike frames, assuming that Munoz 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 Munoz outsource the bike frames?

b$.$Assuming that Munoz 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 Munoz is considering whether to purchase the new equipment or outsource the bike frame, calculate the impact on profitability between the two alternatives.