1.Make or Buy A restaurant bakes its own bread for a cost of $148 per unit (100 loaves), including fixed costs of $33 per unit. A proposal is offered to purchase bread from an outside source for $98 per unit, plus $8 per unit for delivery. Prepare a differential analysis dated July 7 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread, assuming that fixed costs are unaffected by the decision. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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1.Make or Buy

A restaurant bakes its own bread for a cost of $148 per unit (100 loaves), including fixed costs of $33 per unit. A proposal is offered to purchase bread from an outside source for $98 per unit, plus $8 per unit for delivery.

Prepare a differential analysis dated July 7 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread, assuming that fixed costs are unaffected by the decision. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

2. Replace Equipment

A machine with a book value of $246,600 has an estimated six-year life. A proposal is offered to sell the old machine for $216,500 and replace it with a new machine at a cost of $282,700. The new machine has a six-year life with no residual value. The new machine would reduce annual direct labor costs from $49,400 to $39,500.

Prepare a differential analysis dated October 3 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Make or Buy
A restaurant bakes its own bread for a cost of $148 per unit (100 loaves), including fixed costs of $33 per unit. A proposal is offered to purchase bread from an
outside source for $98 per unit, plus $8 per unit for delivery.
Prepare a differential analysis dated July 7 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread, assuming that fixed
costs are unaffected by the decision. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Differential Analysis
Make Bread (Alt. 1) or Buy Bread (Alt. 2)
July 7
Differential Effect
Buy Bread
(Alternative 1) (Alternative 2)
Make Bread
on Income
(Alternative 2)
Sales price
$0
$0
$0
Unit Costs:
Purchase price
Delivery
Variable costs
Fixed factory overhead
Income (Loss)
Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread.
Transcribed Image Text:Make or Buy A restaurant bakes its own bread for a cost of $148 per unit (100 loaves), including fixed costs of $33 per unit. A proposal is offered to purchase bread from an outside source for $98 per unit, plus $8 per unit for delivery. Prepare a differential analysis dated July 7 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread, assuming that fixed costs are unaffected by the decision. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Make Bread (Alt. 1) or Buy Bread (Alt. 2) July 7 Differential Effect Buy Bread (Alternative 1) (Alternative 2) Make Bread on Income (Alternative 2) Sales price $0 $0 $0 Unit Costs: Purchase price Delivery Variable costs Fixed factory overhead Income (Loss) Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread.
Replace Equipment
A machine with a book value of $246,600 has an estimated six-year life. A proposal is offered to sell the old machine for $216,500 and replace it with a new
machine at a cost of $282,700. The new machine has a six-year life with no residual value. The new machine would reduce annual direct labor costs from $49,400
to $39,500.
Prepare a differential analysis dated October 3 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount
is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Differential Analysis
Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)
October 3
Continue with
Replace Old
Differential Effect
Old Machine
Machine
on Income
(Alternative 1) (Alternative 2)
(Alternative 2)
Revenues:
Proceeds from sale of old machine $
Costs:
Purchase price
Direct labor (6 years)
Income (Loss)
Should the company continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)?
Transcribed Image Text:Replace Equipment A machine with a book value of $246,600 has an estimated six-year life. A proposal is offered to sell the old machine for $216,500 and replace it with a new machine at a cost of $282,700. The new machine has a six-year life with no residual value. The new machine would reduce annual direct labor costs from $49,400 to $39,500. Prepare a differential analysis dated October 3 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) October 3 Continue with Replace Old Differential Effect Old Machine Machine on Income (Alternative 1) (Alternative 2) (Alternative 2) Revenues: Proceeds from sale of old machine $ Costs: Purchase price Direct labor (6 years) Income (Loss) Should the company continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)?
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