Grimm Company makes decorative wedding cakes. The company is considering buying the cakes rather than baking them, which will allow it to concentrate on decorating. The company averages 100 wedding cakes per year and incurs the following costs from baking wedding cakes: (Click the icon to view the costs.) Fixed costs are primarily the depreciation on kitchen equipment such as ovens and mixers. Grimm expects to retain the equipment. Grimm can buy the cakes for $25. 11. 12. Should Grimm make the cakes or buy them? Why? If Grimm decides to buy the cakes, what are some qualitative factors that Grimm should also consider? 11. Should Grimm make the cakes or buy them? Why? (For the Difference column, use a minus sign or parentheses only when the cost of outsourcing exceeds the cost of making the cakes in-house.) Difference Make cakes Outsource cakes (make-outsource) Cake costs Variable costs: Direct materials Direct labor Variable manufacturing overhead Purchase cost Total differential cost of cakes Grimm continue to make the cakes. Outsourcing will 12. If Grimm decides to buy the cakes, what are some qualitative factors that Grimm should also consider? OA. Qualitative factors include separating fixed and variable costs. O B. Qualitative factors include considering sunk costs and manager's opinions. OC. Qualitative factors include quality and on-time delivery. OD. Qualitative factors include contribution margins of the various products produced. Data table Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing cost. Number of cakes Cost per cake Print $ S $ Done 500 1,000 200 1,200 2,900 + 100 29 - X
Grimm Company makes decorative wedding cakes. The company is considering buying the cakes rather than baking them, which will allow it to concentrate on decorating. The company averages 100 wedding cakes per year and incurs the following costs from baking wedding cakes: (Click the icon to view the costs.) Fixed costs are primarily the depreciation on kitchen equipment such as ovens and mixers. Grimm expects to retain the equipment. Grimm can buy the cakes for $25. 11. 12. Should Grimm make the cakes or buy them? Why? If Grimm decides to buy the cakes, what are some qualitative factors that Grimm should also consider? 11. Should Grimm make the cakes or buy them? Why? (For the Difference column, use a minus sign or parentheses only when the cost of outsourcing exceeds the cost of making the cakes in-house.) Difference Make cakes Outsource cakes (make-outsource) Cake costs Variable costs: Direct materials Direct labor Variable manufacturing overhead Purchase cost Total differential cost of cakes Grimm continue to make the cakes. Outsourcing will 12. If Grimm decides to buy the cakes, what are some qualitative factors that Grimm should also consider? OA. Qualitative factors include separating fixed and variable costs. O B. Qualitative factors include considering sunk costs and manager's opinions. OC. Qualitative factors include quality and on-time delivery. OD. Qualitative factors include contribution margins of the various products produced. Data table Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing cost. Number of cakes Cost per cake Print $ S $ Done 500 1,000 200 1,200 2,900 + 100 29 - X
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Answer all questions
Outsourcing will (decrease profits by $800/increase profits by $800)
Transcribed Image Text:Grimm Company makes decorative wedding cakes. The company is considering buying the cakes rather than baking them, which will allow it to concentrate on decorating. The company averages 100 wedding cakes per year and incurs the following costs from baking wedding
cakes:
(Click the icon to view the costs.)
Fixed costs are primarily the depreciation on kitchen equipment such as ovens and mixers. Grimm expects to retain the equipment. Grimm can buy the cakes for $25.
11.
12.
Should Grimm make the cakes or buy them? Why?
If Grimm decides to buy the cakes, what are some qualitative factors that Grimm should also consider?
11. Should Grimm make the cakes or buy them? Why? (For the Difference column, use a minus sign or parentheses only when the cost of outsourcing exceeds the cost of making the cakes in-house.)
Difference
Make cakes Outsource cakes (make - outsource)
Cake costs
Variable costs:
Direct materials
Direct labor
Variable manufacturing overhead
Purchase cost
Total differential cost of cakes
Grimm
continue to make the cakes. Outsourcing will
12. If Grimm decides to buy the cakes, what are some qualitative factors that Grimm should also consider?
O A. Qualitative factors include separating fixed and variable costs.
O B. Qualitative factors include considering sunk costs and manager's opinions.
O C. Qualitative factors include quality and on-time delivery.
O D. Qualitative factors include contribution margins of the various products produced.
-
Data table
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Total manufacturing cost
Number of cakes
Cost per cake
Print
Done
$
$
$
500
1,000
200
1,200
2,900
+ 100
29
X
Transcribed Image Text:Grimm
continue to make the cakes. Outsourcing will
12. If Gi
e cakes, what are some qualitative factors that Grimm should also consider?
O A.
ude separating fixed and variable costs.
O B.
ude considering sunk costs and manager's opinions.
O C.
should not
ude quality and on-time delivery.
O D. Qualitative factors include contribution margins of the various products produced.
should
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