FBbgtO Suppose Italian Grill restaurant is considering whether to (1) bake bread for its restaurant in-house or (2) buy the bread from a local bakery. The chef estimates that variable costs of making each loaf include $0.56 of ingredients, $0.21 of variable overhead (electricity to run the oven), and $0.75 of direct labor for kneading and forming the loaves. Allocating fixed overhead (depreciation on the kitchen equipment and building) based on direct labor, Italian Grill assigns $0.99 of fixed overhead per loaf. None of the fixed costs are avoidable. The local bakery would charge $1.84 per loaf. Read the requirements. C... Cost per unit Requirement 2. Should Italian Grill bake the bread in-house or buy from the local bakery? Why? Decision: since the of making each loaf is Requirement 3. In addition to the financial analysis, what else should Italian Grill consider when making this decision? Italian Grill should consider the following qualitative factors before making a final decision: OA. Will the local bakery meet their delivery time requirements? OB. How does the quality and freshness of the local bakery bread compare to Italian Grill bread? OC. Both A and B OD. None of the above possible the cost of outsourcing each loaf 4
FBbgtO Suppose Italian Grill restaurant is considering whether to (1) bake bread for its restaurant in-house or (2) buy the bread from a local bakery. The chef estimates that variable costs of making each loaf include $0.56 of ingredients, $0.21 of variable overhead (electricity to run the oven), and $0.75 of direct labor for kneading and forming the loaves. Allocating fixed overhead (depreciation on the kitchen equipment and building) based on direct labor, Italian Grill assigns $0.99 of fixed overhead per loaf. None of the fixed costs are avoidable. The local bakery would charge $1.84 per loaf. Read the requirements. C... Cost per unit Requirement 2. Should Italian Grill bake the bread in-house or buy from the local bakery? Why? Decision: since the of making each loaf is Requirement 3. In addition to the financial analysis, what else should Italian Grill consider when making this decision? Italian Grill should consider the following qualitative factors before making a final decision: OA. Will the local bakery meet their delivery time requirements? OB. How does the quality and freshness of the local bakery bread compare to Italian Grill bread? OC. Both A and B OD. None of the above possible the cost of outsourcing each loaf 4
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:FBbbed by
Suppose Italian Grill restaurant is considering whether to (1) bake bread for its restaurant in-house or (2) buy the bread from a local bakery. The chef estimates that variable costs of
making each loaf include $0.56 of ingredients, $0.21 of variable overhead (electricity to run the oven), and $0.75 of direct labor for kneading and forming the loaves. Allocating fixed
overhead (depreciation on the kitchen equipment and building) based on direct labor, Italian Grill assigns $0.99 of fixed overhead per loaf. None of the fixed costs are avoidable. The
local bakery would charge $1.84 per loaf.
Read the requirements.
Cost per unit
Requirement 2. Should Italian Grill bake the bread in-house or buy from the local bakery? Why?
Decision:
...
since the
of making each loaf is
Requirement 3. In addition to the financial analysis, what else should Italian Grill consider when making this decision?
Italian Grill should consider the following qualitative factors before making a final decision:
OA. Will the local bakery meet their delivery time requirements?
OB. How does the quality and freshness of the local bakery bread compare to Italian Grill bread?
OC. Both A and B
OD. None of the above
es possible
the cost of outsourcing each loaf.
Transcribed Image Text:Suppose Italian Grill restaurant is considering whether to (1) bake bread for its restaurant in-house or (2) buy the bread from a local bakery. The chef estimates that variable costs of
making each loaf include $0.56 of ingredients, $0.21 of variable overhead (electricity to run the oven), and $0.75 of direct labor for kneading and forming the loaves. Allocating fixed
overhead (depreciation on the kitchen equipment and building) based on direct labor, Italian Grill assigns $0.99 of fixed overhead per loaf. None of the fixed costs are avoidable. The
local bakery would charge $1.84 per loaf.
Read the requirements.
Requirements 1. What is the unit cost of making the bread in-house?
Complete the following outsourcing decision analysis to determine Italian Grill's unit cost of making the bread.
Direct material
Direct labor
Italian Grill
Outsourcing Decision
Variable overhead
Variable cost per unit
Plus: Fixed overhead per unit
Cost per unit
K
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