Make or Buy A restaurant bakes its own bread for a cost of $156 per unit (100 lo

Question

Make or Buy A restaurant bakes its own bread for a cost of $156 per unit (100 loaves), including fixed costs of $35 per unit. A proposal is offered to purchase bread from an outside source for $98 per unit, plus $8 per unit for delivery 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. If an amount is zero, enter zero "O" Differential Analysis Make Bread (Alt. 1) or Buy Bread (Alt. 2) Make Bread (Alternative 1) $0 Buy Bread (Alternative 2) $0 Differential Effect on Income (Alternative 2) $0 Selling Price Unit Costs: Arm Purchase price Delivery Variable costs Fixed factory er Item overhead Income (Loss) ed It ive Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread. versat Emai Feeds

Explanation / Answer

DIFFFERENTIAL ANALYSIS MAKE BUY DIFFFERENTIAL EFFECT ON INCOME Selling Price 0 0 0 Unit Cost: Purchase pricec 0 9800 Delivery 800 Variable cost 12100 0 Fixed Factory OH 3500 3500 Income -15600 -14100 1500 The company shall Buy the Bread -Alternative2

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