Suppose Seafood House restaurant is considering whether to (1) bake bread for it

Question

Suppose Seafood House 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 $0.58 of ingredients, $0.20 of variable overhead (electricity to run the oven), and $0.79 of direct labor for kneading and forming the loaves. Allocating fixed overhead (depreciation on the kitchen equipment and building) based on direct labor, Seafood House assigns $0.99 of fixed overhead per loaf. None of the fixed costs are avoidable. The local bakery would charge $1.70 per loaf Read the requirements Requirements 1. What is the unit cost of making the bread in-house? Complete the following outsourcing decision analysis to determine Seafood House's unit cost of making the bread. Seafood House Outsourcing Decision Direct material Direct labor Variable overhead Variable cost per unit Plus: Fixed overhead per unit Cost per unit Requirement 2. Should Seafood House bake the bread in-house or buy from the local bakery? Why? l since the | of making each loaf is the cost of outsourcing each loa Enter any number in the edit fields and then continue to the next question. 17 0 #6 FT 1O r 4 F5 2 3 4 6 8

Explanation / Answer

1) Cost of making

2) Company should bake the break in house not outsource

Decision : Company should bake the bread in house since the 1.57 of making each loaf is 1.70 cost of outsourcing..

Direct material 0.58 Direct labour 0.79 Variable overhead cost per unit 0.20 Fixed overhead cost per unit 0 Total cost per unit 1.57

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.