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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
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: Fixed overhead will continue whether the ingredient is produced internally or externally. No additional costs of purchasing wil 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. 1. What are the alternatives for Fresh Foods? Make the Ingredient in house or buy it externally. 2. Ust the relevant cost(5) of internal production and of external purchase. 3. Which alternative is more cost effective and by how much? (Use total cost when giving your answer.) is 4. Now assume that 20% of the fixed overhead can be avoided if the ingredient is purchased externolly. Which olternative is more cost effective and by how much? (Use total cost when giving your answer.) Freaback roneck My Wok 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 column tists all costs. Second and third columns are for aiternatives, make or buy and list all amounts. Fourth column is the differential cost to make
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