Make-or-buy Beau's Bistro has a reputation for providing good value for its menu prices. The desserts, developed by the pastry chef, are one of the distinc¬ tive features of the menu. The pastry chef has just given notice that he will relo¬ cate to another city in a month, and has volunteered to share some of the dessert recipes with the next pastry chef. Beau has been concerned about the Bistros declining profits, but is reluctant to raise prices because of the competi¬ tion he faces. He decided this was an opportune time to consider outsourcing dessert production. Beau solicited bids for dessert production and delivery, and is evaluating two bids, as well as the alternative of hiring a new pastry chef who would make the desserts in-house. The first bid is from a gourmet dessert provider who would fill the Bistro's current dessert demand for $5500 per month, and would periodically introduce new gourmet desserts. The second bid is from a dessert provider who would provide high-quality, traditional desserts to fill Bistro's current demand (in terms of servings) for $5000 per month. Beau has identified the following costs per month if the desserts are made in-house.

REQUIRED

(a) What qualitative factors are relevant for this decision?

(b) Would you advise Beau to outsource dessert production? Provide reasons for your decision.

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Ingredients Pastry chef labor Assistants' labor Direct support Total $ 500 3500 1500 200 $5700