A restaurant bakes its own bread for a cost of $150 per unit (100 loaves), inclu
ID: 2560049 • Letter: A
Question
A restaurant bakes its own bread for a cost of $150 per unit (100 loaves), including fixed costs of $40 per unit. A proposal is offered to purchase bread from an outside source for $99 per unit, plus $15 per unit for delivery. Required: 1. Prepare a differential analysis dated August 16 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread, assuming fixed costs are unaffected by the decision. Refer to the list of Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required. 2. Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread. A restaurant bakes its own bread for a cost of $150 per unit (100 loaves), including fixed costs of $40 per unit. A proposal is offered to purchase bread from an outside source for $99 per unit, plus $15 per unit for delivery. Required: 1. Prepare a differential analysis dated August 16 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread, assuming fixed costs are unaffected by the decision. Refer to the list of Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required. 2. Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread. Required: 1. Prepare a differential analysis dated August 16 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread, assuming fixed costs are unaffected by the decision. Refer to the list of Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required. 2. Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread.Explanation / Answer
a) Make Buy Differential Effect on Bread Bread income Unit costs: purchase price per unit 0 99 -99 Delivery per unit 0 15 -15 variable costs per unit 100 0 100 fixed factory overhead per unit 50 50 0 income(loss)per unit 150 164 -14 b) the company should continue making