FBbgtO Suppose Italian Grill 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 $0.56 of ingredients, $0.21 of variable overhead (electricity to run the oven), and $0.75 of direct labor for kneading and forming the loaves. Allocating fixed overhead (depreciation on the kitchen equipment and building) based on direct labor, Italian Grill assigns $0.99 of fixed overhead per loaf. None of the fixed costs are avoidable. The local bakery would charge $1.84 per loaf. Read the requirements. C... Cost per unit Requirement 2. Should Italian Grill bake the bread in-house or buy from the local bakery? Why? Decision: since the of making each loaf is Requirement 3. In addition to the financial analysis, what else should Italian Grill consider when making this decision? Italian Grill should consider the following qualitative factors before making a final decision: OA. Will the local bakery meet their delivery time requirements? OB. How does the quality and freshness of the local bakery bread compare to Italian Grill bread? OC. Both A and B OD. None of the above possible the cost of outsourcing each loaf 4

Windu Enterprises uses a manufacturing process that is very labor intensive to manufacture its multicolored laser vegetable slicers. Windu is considering a change to a more automated manufacturing process. The cost structure information for Windu's options are listed below. Windu sells its only product for $25 per unit. Costs Fixed Manufacturing Costs Variable Manufacturing Cost per unit Current Method $180,000 $15 Automated Method $240,000 $13 Required. 1. Compute the breakeven points for both production methods 2. Compute the point of indifference for these two production methods (i.e. at what number of units of production will income be equal for both methods?) 3. Calculate the Operating Leverage Factor for both methods at the point of indifference + 4. If Windu's management intends to produce and sell 35,000 units, which production method should they use? 5. By how much per unit (nearest $.01) would the current method's variable cost need to decrease in order for management to be…

AIP 10.7 Overhead Costs from a New Factory Karsten is one of the premier carpet manufacturers in the world. It manufactures carpeting for both residential and commercial applications. Home sales and commercial sales each account for about 50 percent of total revenues. The firm is organized into three departments: Manu facturing, Residential Sales, and Commercial Sales. Manufacturing is a cost center and the two sales departments are profit centers. The full cost of each roll of carpeting produced (including fully absorbed overhead) is transferred to the sales department ordering the carpet. The evaluation of the sales departments includes the fully absorbed cost of each roll as the transfer price. The current manufacturing plant is operating at capacity. A new plant is being built that will more than double capacity. Within two years, management believes that its businesses will grow such that most of the excess capacity will be eliminated. When the new plant comes online, the plan is…

Suppose Country Cafe 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 $0.44 of ingredients, $0.28 of variable overhead (electricity run the oven), and $0.72 of direct labor for kneading and forming the loaves. Allocating fixed overhead (depreciation in the kitchen equipment and building) bases on the direct labor, County Cafe l assigns $1.05 of fixed overheard per loaf. None of the fixed costs are avoidable. The local bakery would charge $1.72 per loaf. Requirements 1. What is the unit cost of making the bread in-house? Complete the following outsourcing decision analysis to determine Country Cafe's unit cost of making the bread