Make or Buy

A restaurant bakes its own bread for a cost of $160 per unit (100 loaves), including fixed costs of $31 per unit. A proposal is offered to purchase bread from an outside source for $95 per unit, plus $12 per unit for delivery.

Prepare a differential analysis dated July 7 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread, assuming that fixed costs are unaffected by the decision. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis
Make Bread (Alt. 1) or Buy Bread (Alt. 2)
July 7
	Make Bread (Alternative 1)	Buy Bread (Alternative 2)	Differential Effect on Income (Alternative 2)
Sales price	$0	$0	$0
Unit Costs:
Purchase price	$______	$________	$________
Delivery	_______	_______	________
Variable costs	________	_________	___________
Fixed factory overhead	________	_______	_________
Income (Loss)	$_______	$______	$_______

Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread.