assigns $$1\mathrm{.}00$ of fixed overhead per loaf. None of the fixed costs are avoidable. The local bakery would charge $$1\mathrm{.}72$ per loaf.

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?

Decision:

since the

of making each loaf is

the cost of outsourcing each loaf.

Requirement $3.$ In addition to the financial analysis, what else should Seafood House consider when making this decision?

Seafood House should consider the following qualitative factors before making a final decision:

A$.$ How does the quality and freshness of the local bakery bread compare to Seafood House bread?

B$.$ Will the local bakery meet their delivery time requirements?

C$.$ Both A and $B$

D$.$ None of the above