? | 23 of 24 (1700, plete) ? This Test: 125 pts possible Question Help Suppose C

Question

? | 23 of 24 (1700, plete) ? This Test: 125 pts possible Question Help Suppose Country Cafe restaurant is considering whether to (1) $0.62 of ingredients, $0.20 of variable overhead (electricity to run the oven), and $0.72 of dinect labor f building) based on direct labor, Country Cafe assigns $1.04 of bake bread for its restaurant in-house or (2) buy the bread froma fxed overhead per loa None of the fxed costs ane avoidable The local bakery would charge $1 local bakary. The chet etmates that vrable costs of making each loaf include or kneading and forming the loeves. Allocating feed overhead (depreciation on the kitchen equipment and UseRead the reualrement Requirements 1. What is the unt cost of making the bread in-house? Complete the following outsourcing decision analysis to determine Countey Cale's unit cost of Exe making the brod Country Cafe Outsoureing Decision Direct material Direct labor Variable overhead Variable cost per uni Plus Fixed overhead per unt Cost per un Requirement 2. Shouks Country Cafe bake the bread in-house or buy from the local bakery? why? Decision Requirement 3. In addtion to the financial analyss what ese should Country Cafe consider when makingth decision? Country Cale shoud consider the folowing qualitative factors before making a fieal decision O A We the local bakery meet their delivery e roquremenms? since the of making each loaf s the cost of outsouroing each oa B. How does the quaity and freshness of the ocal bakery broad compare to Country Cafe broad O G. Both A and O D. None of the above Enter any number in the edit folds and then continue to the next question

Explanation / Answer

Answer 1

Unit Cost of making bread in-house:

Since it is mentioned in question that none of the fixed cost is avoidable even if bread is purchased from local store, fixed cost per unit shall be ignored for decision making and only variable cost of making the bread will be relevant.

Decision: Country café restaurant should make the bread in-house since variable cost ($ 1.54) of making the bread is less than cost buying the bread ($ 1.74) from the local store.

In addition to financial analysis, the restaurant should also consider factors mentioned in option A & B.

Answer 2

Since the total contribution margin in case of Designer product is higher as compared to the one moderately priced, Cole company should emphasise on Designer Products.

Answer 3

Nailey should manage the fleet by himself i.e. In-house beacause costing of managing fleet in-house ($ 306,250) is less than annual fee of $ 385,000 charged by Fleet Management services.

Nailey should consider all the qualitative factors mentioned in points A,B,C & D.

Direct Material           0.62 Direct Labour           0.72 Variable Overhead           0.20 Variable Cost per unit           1.54 Add: Fixed Cost per unit           1.04 Cost per unit           2.58

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