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 purchas them from an outside supplier for $12 each. Cost information on internal production includes the following: Total Cost Unit Cost Direct materials $25,000 $5.00 Direct labor 15,000 3.00 Variable manufacturing overhead 7,500 1.50 Variable marketing overhead 11,000 2.20 Fixed plant overhead 30,000 6.00 Total $88,500 $17.70 Fixed overhead will continue whether the ingredient is produced internally or externally. No additional costs of purchasing will be incurred beyond the purchase price. If required, round your answers to the nearest whole number Required: 1. What are the alternatives for Fresh Foods? Make the ingredient in house or buy it externally 2. List the relevant cost(s) of internal production and of external purchase All of the above 3. Which alternative is more cost effective and by how much? (Use total cost when giving your answer.) Make 1,000 x 4. Now assume that 20% of the fixed overhead can be avoided if the ingredient is purchased externally, which alternative is more cost effective and by how much? (Use total cost when giving your answer.) Next Check My Workmore Check My Work uses remaining Fixed overhead will continue whether the ingredient is produced internally or externally. No additional costs of purchasing will be incurred beyond the purchase price. I required, round your answers to the nearest whole number Red 1. What are the alternatives for Fresh Foods Make the ingredient in house or buy it externally 2. List the relevant cout(e) of internal production and of external purchase All of the above 3. Which alternative is more cost effective and by how much? (Use total cost when giving your answer) 1,000 x 4. Now assume that 20% of the fixed twarhead can be avoided if the ingredient is purchased externally, which alternative is more cost effective and by how much? (Use total cost when giving your answer.) Buy 13 X Check My Work 1. and 2. The ingredient can be produced internally or purchased externally 3. Relevant costs are future costs and differ across alternatives. Determine relevant costs for both alternatives. Set up four columns First columnists all costs Second and third columns are for alternatives, make or buy and list all amounts. Fourth column is the differential cost to make Next > Check My Work more Check My Work uses remaining