
Outsourcing production decision (Learning Objectives 1 & 6)
Suppose a Luca’s Garden 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 $0.54 of ingredients, $0.20 of variable
- 1. What is the absorption cost of making a loaf of bread in-house? What is the variable cost per loaf?
- 2. Should Luca’s Garden bake the bread in-house or buy from the local bakery? Why?
- 3. In addition to the financial analysis, what else should Luca’s Garden consider when making this decision?

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Chapter 8 Solutions
Managerial Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (5th Edition)
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