b

$5.00 15,000 3.00 1:50 1.60 6.00 Fresh Foods, a large restaurant chain, needs to determine if it would be cheaper to produce 5,000 units of its main food ingredient for use in its restaurants or to purchase them from an outside supplier for $12 each, Cost information on internal production includes the following: Total Cost Unit Cost Direct materials $25,000 Direct labor Variable manufacturing overhead 7,500 Variable marketing overhead 8,000 Poved plant overhead 30,000 Total $85,500 $17.10 Fred overhead will continue whether the ingredient is produced internally or externally. No additional costs of purchasing will be incurred beyond the purchase delce in required, round your arowers to the nearest whole number Required: 1. Wist are the alternatives for Fresh Foods? Make the ingredient in house and sell it externally 2. Ust the relevant cost(s) of internal production and of external purchase Director 3. Which temative is more cost effective and by how much? (Use total cost when prving your answer.) X Make 4. Now waume that 20% of the fived overhead can be avoided in the ingredient is purchased externally with alternative is more cost effective and by how much! (ve total cost when giving your answer.) Buy