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A. Tidbit Caf has been in business for five years. The manager is considering adding a new signature cocktail to its line of products.
A. Tidbit Caf has been in business for five years. The manager is considering adding a new signature cocktail to its line of products. The cost per litre for making the cocktail is estimated to be: Direct material $20 Direct labour cost $80 Variable overhead $40 Fixed overhead applied Total $60 $200 Tidbit Caf estimates the quantity required per month to be 5,000 litres. The company also has the option of purchasing the cocktail mixture from Fine Beverages (an outside supplier) for $220 per litre. If the company chooses to outsource production, the fixed overhead applied will be reduced by 40%. Required: Prepare an analysis to help the manager of Tidbit Caf decide whether to buy or to make their own cocktail.
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