Sunshine Bakery is a popular bakery known for its delicious and healthy cookies. They are

considering outsourcing the production of their signature oatmeal raisin cookies. A potential supplier

has offered to produce the cookies for $$125$ per unit. Here's a breakdown of Sunshine Bakery's internal

production costs per unit for $15,000$ cookies per month:

Direct Material: $$80$

Direct Labour: $$50$

Variable Overhead: $$20$

Fixed Overhead: $$30($allocated based on production volume$)$

Additional Considerations:

If Sunshine Bakery buys the cookies, $25\%$ of the fixed costs would be avoided.

Sunshine Bakery currently operates at $75\%$ capacity.

If they outsource production, they can potentially lease out the underutilised equipment for

$$300,000$ per month.

There's a risk of losing some quality control by outsourcing.

The bakery prides itself on its "made from scratch" image. Outsourcing might affect brand

perception.

Task $21$A Analyse the situation and advise Sunshine Bakery on whether they should make

$[8$ Marks$]$ or buy the oatmeal raisin cookies based on your financial evaluation. Support

your answer with calculations.

Task $21$B From the scenario, list two $(2)$ qualitative factors that Sunshine Bakery consider

$[2$ Marks$]$ before making the final decision.