A restaurant bakes its own bread for a cost of $160 per unit (100 loaves), including fixed costs of $32 per unit. A proposal is offered to purchase bread from an outside source for $97 per unit, plus $8 per unit for delivery. Prepare a differential analysis dated July 7 to determine whether the company should
A restaurant bakes its own bread for a cost of $160 per unit (100 loaves), including fixed costs of $32 per unit. A proposal is offered to purchase bread from an outside source for $97 per unit, plus $8 per unit for delivery. Prepare a differential analysis dated July 7 to determine whether the company should
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Make or Buy
A restaurant bakes its own bread for a cost of $160 per unit (100 loaves), including fixed costs of $32 per unit. A proposal is offered to purchase bread from an outside source for $97 per unit, plus $8 per unit for delivery.
Prepare a differential analysis dated July 7 to determine whether the company should Make Bread (Alternative 1) or Buy Bread (Alternative 2), 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.
Make Bread (Alt. 1) or Buy Bread (Alt. 2)
July 7
| Make Bread (Alternative 1) |
Buy Bread (Alternative 2) |
Differential Effect (Alternative 2) |
|
| Unit Costs: | |||
| Purchase price | $fill in the blank | $fill in the blank | $fill in the blank |
| Delivery | fill in the blank | fill in the blank | fill in the blank |
| Variable costs | fill in the blank | fill in the blank | fill in the blank |
| Fixed factory overhead | fill in the blank | fill in the blank | fill in the blank |
| Total unit costs | $fill in the blank | $fill in the blank | $fill in the blank |
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