Make or BuyA restaurant bakes its own bread for a cost of $160 per unit (100 loaves), including fixed costs of $33 per unit. A proposal is offered to purchase bread froman outside source for $95 per unit, plus $7 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 thatfixed costs are unaffected by the decision. If an amount is zero, enter "O". For those boxes in which you must enter subtracted or negative numbers use aminus sign.Differential AnalysisMake Bread (Alt. 1) or Buy Bread (Alt. 2)July 7Differential EffectMake Bread(Alternative 1) (Alternative 2)Buy Breadon Income(Alternative 2)Sales price$0$0$0Unit Costs:$Purchase priceDeliveryVariable costsFixed factory overheadMake the breadBuy the breadthe company should make (Alternative 1) or buy (Alternative 2) the bread.

A technique which is used when the decision regarding choosing one of the alternatives is to be…

Answered: Make or Buy A restaurant bakes its own…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Leo Consulting enters into a contract with Highgate University to restructure Highgate's processes for purchasing goods from suppliers. The contract states that Leo will earn a fixed fee of $80,000 and earn an additional $16,000 if Highgate achieves $160,000 of cost savings. Leo estimates a 50% chance that Highgate will achieve $160,000 of cost savings. Assuming that Leo determines the transaction price as the expected value of expected consideration, what transaction price will Leo estimate for this contract? Transaction price for the contract
Making outsourcing decisions Snow Ride manufactures snowboards. Its cost of making 1,900 bindings is as follows; Suppose Livingston will sell bindings to Snow Ride for $13 each. Snow Ride would pay $3 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.50 per binding. Requirements Snow Ride’s accountants predict that purchasing the bindings from Livingston will enable the company to avoid $2,100 of fixed overhead. Prepare an analysis to show whether Snow Ride should make or buy the bindings. The facilities freed by purchasing bindings from Livingston can be used to manufacture another product that will contribute $3,100 to profit. Total fixed costs will be the same as if Snow Ride had produced the bindings. Show which alternative makes the best use of Snow Ride’s facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product.
Vaughn Manufacturing is starting business and is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $65 and Vaughn Manufacturing would sell it for $145. The cost to assemble the product is estimated at $28 per unit and Vaughn Manufacturing believes the market would support a price of $178 on the assembled unit. What is the correct decision using the sell or process further decision rule and why? Process further because profits will be greater by $33 per unit. Sell before assembly because profits will be greater by $33 per unit. Sell before assembly because profits will be greater by $28 per unit. O Process further because profits will be greater by $5 per unit. eTextbook and Media Save for Later Attempts: 2 of 3 used Submit Answer
Alternate cost structures, uncertainty, and sensitivity analysis. Corporate Printing Company currently leases its only copy machine for $1,500 a month. The company is considering replacing this leasing agreement with a new contract that is entirely commission based. Under the new agreement, Corporate would pay a commission for its printing at a rate of $20 for every 500 pages printed. The company currently charges $0.20 per page to its customers. The paper used in printing costs the company $0.05 per page and other variable costs, including hourly labor, amount to $0.10 per page. Required: What is the company’s breakeven point under the current leasing agreement? What is it under the new commission-based agreement? For what range of sales levels will Corporate prefer (a) the fixed lease agreement and (b) the commission agreement? Do this question only if you have covered the chapter appendix in your class. Corporate estimates that the company is equally likely to sell 20,000, 30,000,…
A restaurant bakes its own bread for a cost of $152 per unit (100 loaves), including fixed costs of $30 per unit. A proposal is offered to purchase bread from an outside source for $105 per unit, plus $11 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 Make Bread(Alternative 1) Buy Bread(Alternative 2) Differential Effecton Income(Alternative 2) Sales price $0 $0 $0 Unit Costs: Purchase price $fill in the blank 8cd8baf43f9c031_1 $fill in the blank 8cd8baf43f9c031_2 $fill in the blank 8cd8baf43f9c031_3 Delivery fill in the blank 8cd8baf43f9c031_4 fill in the blank 8cd8baf43f9c031_5 fill in the…
Product T is produced for $5.90 per pound. Product T can be sold without additionalprocessing for $7.10 per pound, or processed further into Product U at an additionalcost of $0.74 per pound. Product U can be sold for $8.00 per pound. Prepare and show in solution a differential analysis dated August 2 on whether to sell Product T (Alternative 1) or process further into Product U (Alternative 2).
Make or Buy A restaurant bakes its own bread for a cost of $168 per unit (100 loaves), including fixed costs of $36 per unit. A proposal is offered to purchase bread from an outside source for $98 per unit, plus $9 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 Make Bread(Alternative 1) Buy Bread(Alternative 2) Differential Effecton Income(Alternative 2) Sales price $0 $0 $0 Unit Costs: Purchase price $fill in the blank c067b9003ffaff2_1 $fill in the blank c067b9003ffaff2_2 $fill in the blank c067b9003ffaff2_3 Delivery fill in the blank c067b9003ffaff2_4 fill in the blank c067b9003ffaff2_5…
Process or Sell Product A is produced for $3.58 per pound. Product A can be sold without additional processing for $4.1 per pound or processed further into Product B at an additional cost of $0.47 per pound. Product B can be sold for $4.4 per pound. Prepare a differential analysis dated November 15 on whether to sell A (Alternative 1) or process further into B (Alternative 2). If required, round your answers to the nearest whole dollar. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Sell Product A (Alt. 1) or Process Further into Product B (Alt. 2) November 15 Sell Product A(Alternative 1) Process Furtherinto ProductB (Alternative 2) Differential Effecton Income(Alternative 2) Revenues, per unit $fill in the blank 50d2fef42fcd026_1 $fill in the blank 50d2fef42fcd026_2 $fill in the blank 50d2fef42fcd026_3 Costs, per unit fill in the blank 50d2fef42fcd026_4 fill in the blank 50d2fef42fcd026_5 fill in…
Product F is produced for $3.32 per pound. Product F can be sold without additional processing for $4.14 per pound or processed further into Product G at an additional cost of $0.41 per pound. Product G can be sold for $4.54 per pound. Prepare a differential analysis dated November 15 on whether to Sell Product F (Alternative 1) or Process Further into Product G (Alternative 2). If required, round your answer to the nearest cent. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Sell Product F (Alt. 1) or Process Further into Product G (Alt. 2) November 15 Process Further into Sell Differential Product G Product F Effect (Alternative 2) (Alternative 1) (Alternative 2) Revenues, per unit 2$ Costs, per unit Profit (loss), per unit Should Product F be sold (Alternative 1) or processed further into Product G (Alternative 2)?
Make or Buy A company manufactures various sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $56 per unit (100 bottles), including fixed costs of $18 per unit. A proposal is offered to purchase small bottles from an outside source for $29 per unit, plus $4 per unit for freight. Prepare a differential analysis dated March 30 to determine whether the company should Make Bottles (Alternative 1) or Buy Bottles (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. Differential Analysis Make Bottles (Alt. 1) or Buy Bottles (Alt. 2) March 30 Make Buy Differential Bottles Bottles Effect (Alternative 1) (Alternative 2) (Alternative 2) Unit Costs: Purchase price Freight Variable costs Fixed factory overhead Total unit costs Determine whether the company should make (Alternative 1) or buy (Alternative 2) the…
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View Policies Current Attempt in Progress Burger Queen offers a lunch meal deal for its customers. The customer will get a burger, fry, soft drink, and ice cream for $17. If the customer were to buy each item individually, the cost would be broken down as follows: Burger Fry Soft Drink Ice Cream Using the stand-alone cost allocation, how must of the transaction price should be allocated to the fry, soft drink, and ice cream? (Do not round the intermediate calculations.) $3.40 $3.40 $8.50 $4.25 $4.00 $4.50 $0.5 zero $4.50 $3.20 $3.60 $4.25 $3.40 $4.50 zero $4.50

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