23. Dels Diner purchases cookies that it includes in box lunches it prepares and sells. Del presently buys the cookies for $0.60 each but is considering making them instead. Dels kitchen has excess capacity that would allow them to make the cookies rather than buy them and has determined that fixed overhead would not increase if the cookies were made in-house.

By analysis, Del estimates the full absorption cost to bake each cookie in-house will be:

Materials $0.20

Labor 0.15

Variable O.H. 0.15

Allocated fixed O.H. 0.30

Total Cost/cookie $0.80

Del is willing to make the cookies, but doesnt believe its an economical decision based on the analysis abovethis leads him to believe he should continue purchasing cookies for $0.60 each. He asks your expert opinion.

What would you advise Del? Prepare a schedule to show the differential costs between the two alternatives and state your conclusion (earnable credit lies in the schedule). What should Del do, and why concerning the make or buy cookie decision?