The Farm House restaurant makes their own bread to serve in their restaurant. They have been...

 

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The Farm House restaurant makes their own bread to serve in their restaurant. They have been approached by a local bakery offering to make the bread for them. The restaurant has two choices: 1) continue making the bread in-house, or 2) buy it from the local bakery. The Farm House head chef estimated the variable cost of making each loaf of bread to include the following: Sales prices and variable costs are as follows: $0.54 of ingredients, $0.25 of variable overhead, and direct labor costs to knead and form the loaves of $0.72. Allocating fixed overhead is based on direct labor. The Farm House assigns a fixed overhead cost of $1.05 per loaf. None of the fixed costs are avoidable. The local bakery would charge $1.70 per loaf. Should the restaurant bake the bread in-house or buy from the local bakery? I The Farm House restaurant makes their own bread to serve in their restaurant. They have been approached by a local bakery offering to make the bread for them. The restaurant has two choices: 1) continue making the bread in-house, or 2) buy it from the local bakery. The Farm House head chef estimated the variable cost of making each loaf of bread to include the following: Sales prices and variable costs are as follows: $0.54 of ingredients, $0.25 of variable overhead, and direct labor costs to knead and form the loaves of $0.72. Allocating fixed overhead is based on direct labor. The Farm House assigns a fixed overhead cost of $1.05 per loaf. None of the fixed costs are avoidable. The local bakery would charge $1.70 per loaf. Should the restaurant bake the bread in-house or buy from the local bakery? I

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