and building$)$ based on direct labor assigns $$1\mathrm{.}02$ of fixed overhead per loaf. None of the fixed costs are avoidable. The local bakery would charge Roasted Olive $$1\mathrm{.}74$ per loaf.

What is the absorption cost of making the bread in$-$house? What is the variable cost per loaf?

Should Roasted Olive bake the bread in$-$house or buy from the local bakery? Why?

In addition to the financial analysis, what else should Roasted Olive consider when making this decision?

What is the absorption cost of making the bread in$-$house? What is the variable cost per loaf?

Roasted Olive

Outsourcing Decision $($Absorption Costing$)$

Variable cost per loaf

Full $($absorption$)$ cost per loaf