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Suppose Seafood House restaurant is considering whether to (1) bake bread for its restaurant in-house or (2) buy the bread from a local bakery. The
Suppose Seafood House 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 loof include $0.44 of ingredients, 80.22 of variable overhead (electricity to run the oven), and $0.74 of direct labor for reading and forming the loaves. Allocating fixed overhead (depreciation on the kitchen equipment and building) based on direct labor, Seafood House assigns $0.98 of fixed overhead per loaf. None of the fixed costs are avoidable. The local bakery would charge $1.74 per loaf Read the requirements Requirements 1. What is the unit cost of making the bread in-house? Complete the following outsourcing decision analysis to determine Seafood House's unit cost of making the bread. Seafood House Outsourcing Decision Direct material Direct labor Variable overhead Variable cost per unit Plus: Fixed overhead per unit Cost per unit Requirement 2. Should Seafood House bake the bread in-house or buy from the local bakery? Why? since the of making each loafis the cost of outsourcing each Decision: loaf se consider when making this decision? Requirem Seafood House should bake the bread in-house Enter any Next Seafood House should buy the bread from the local bakery e Text Requirement 2. Should Seafood House bake the bread in-house or buy from the local bakery? Why? since the the cost of outsourcing each Decision: of making each loaf is loaf Requirement 3. In addition to the financial analysis, what else should Seafood House consider when making this decision? Seafood House should consider the following qualitative factors before making a final decision O A win the local bakary meet their delivery time requirements? O B. How does the quality and freshness of the local bakery bread compare to Seafood House bread? C. Both A and B OD. None of the above
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