Suppose a Roasted Olive restaurant is considering whether to (1) bake bread for its restaurant in-house or (2) buy the bread from a local bakery. The chef estimates that variable costs of making each loaf include $.46 of ingredients, $.22 of variable overhead (electricity to run the oven), and $.71 of direct labor for kneading and forming the loaves. Allocating fixed overhead (depreciation on the kitchen equipment and building) based on direct labor assigns $1.00 of fixed overhead per loaf. None of the fixed costs are avoidable. The local bakery would charge $1.80 per loaf.

What is the unit cost of making the bread in-house (use absorption costing)?

Should Roasted Olive bake the bread in-house or buy from the local bakery? Why?

1. What is the absorption cost of making the bread in house? What is the variable cost per loar? Olive Teerace Outsourcing Decision (Absorption Costing Variable cost per loaf Ful (absorption) cost per loa 2. Should Olive Terace bake the bread in-house or buy from the local bakery? Why? Decision v since the | the cost of outsourcing each loaf 3. In addition to the financial analysis, what else shoudd Olive Teerace consider when making this decision? Olive Terrace should consider the following qualitative factors before making a final decision O A. How does the quality and freshness of the local bakery beead compare to Clive Terrace bread? O B. If labor and oven time were not devoted to breadmaking, could another more profitable product be made in its place? O c. wul the local bakery meet their delivery time requirements? O D. All of the above E. None of the above Choose from any list or enter any number in the input fields and then continue to the next