Ellie Rickenbacker is Worldwide Airways manager of in-flight services. She supervises the airlines flight attendants and all of the firms food and beverage operations. Rickenbacker currently faces a decision regarding the preparation of in-flight dinners at the airlines Atlanta hub. In the Atlanta flight kitchen, full-course dinners are prepared and packaged for long flights that pass through Atlanta. In the past, all of the desserts were baked and packaged in the flight kitchen. However, Rickenbacker has received an offer from an Atlanta bakery to bake the airlines desserts. To help guide her decision, Rickenbacker has assembled the following cost information, which shows a total cost per dessert of 25 cents:

Variable costs:

Direct materials (food and packaging) 0.06

Direct labor 0.04

Variable overhead 0.04

Fixed costs:

Supervisory salaries 0.04

Depreciation of flight-kitchen equipment 0.07

If Worldwide Airways stops making desserts, it will save all of the variable costs but only 1 cent of fixed costs, since two fewer kitchen supervisors would be necessary. The remainder of the fixed costs would be incurred even if desserts were purchased.

1. Assuming1,000,000dessertsarepreparedpermonth,shouldRickenbackeraccepttheoutsourcingdealornot?Answertobeexplainedfully.Ayesornowillnotbeaccepted.

Also list 3 qualitative factors that must be considered by Rickenbacker before accepting or rejecting the deal.