Suppose Country Cafe 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 $0.44 of ingredients, $0.28 of variable overhead (electricity run the oven), and $0.72 of direct labor for kneading and forming the loaves. Allocating fixed overhead (depreciation in the kitchen equipment and building) bases on the direct labor, County Cafe l assigns $1.05 of fixed overheard per loaf. None of the fixed costs are avoidable. The local bakery would charge $1.72 per loaf. Requirements 1. What is the unit cost of making the bread in-house? Complete the following outsourcing decision analysis to determine Country Cafe's unit cost of making the bread Direct material Direct labor Variable overhead Variable cost per unit Plus : Fixed overhead per unit Cost per unit Requirement 2. Should Country Cafe bake the bread in-house or buy from the local bakery? Why? Decision: __(County Cafe should bake the bread in-house/Country Cafe should buy the bread from the local bakery________________since the _________(Fixed cost/full cost/variable cost)_________of making each loaf is _____(Great cost/less than)______the cost of outsourcing each loaf
Suppose Country Cafe 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 $0.44 of ingredients, $0.28 of variable overhead (electricity run the oven), and $0.72 of direct labor for kneading and forming the loaves. Allocating fixed overhead (depreciation in the kitchen equipment and building) bases on the direct labor, County Cafe l assigns $1.05 of fixed overheard per loaf. None of the fixed costs are avoidable. The local bakery would charge $1.72 per loaf. Requirements 1. What is the unit cost of making the bread in-house? Complete the following outsourcing decision analysis to determine Country Cafe's unit cost of making the bread Direct material Direct labor Variable overhead Variable cost per unit Plus : Fixed overhead per unit Cost per unit Requirement 2. Should Country Cafe bake the bread in-house or buy from the local bakery? Why? Decision: __(County Cafe should bake the bread in-house/Country Cafe should buy the bread from the local bakery________________since the _________(Fixed cost/full cost/variable cost)_________of making each loaf is _____(Great cost/less than)______the cost of outsourcing each loaf
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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Suppose Country Cafe 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 $0.44 of ingredients, $0.28 of variable overhead (electricity run the oven), and $0.72 of direct labor for kneading and forming the loaves. Allocating fixed overhead (depreciation in the kitchen equipment and building) bases on the direct labor, County Cafe l assigns $1.05 of fixed overheard per loaf. None of the fixed costs are avoidable. The local bakery would charge $1.72 per loaf.
Requirements 1. What is the unit cost of making the bread in-house?
Complete the following outsourcing decision analysis to determine Country Cafe's unit cost of making the bread
Direct material
Direct labor
Variable overhead
Variable cost per unit
Plus : Fixed overhead per unit
Cost per unit
Requirement 2. Should Country Cafe bake the bread in-house or buy from the local bakery? Why?
Decision: __(County Cafe should bake the bread in-house/Country Cafe should buy the bread from the local bakery________________since the _________(Fixed cost/full cost/variable cost)_________of making each loaf is _____(Great cost/less than)______the cost of outsourcing each loaf
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