Objective 2 Example 8.1 Fresh Foods, a large restaurant chain, needs to determine if it would be cheaper to produce 5,000 units of its main food ingredient for use in its restaurants or to purchase them from an outside supplier for $12 each. Cost information on internal production includes the following: Direct materials Direct labor Variable manufacturing overhead Variable marketing overhead Fixed plant overhead Total Total Cost Unit Cost $ 5.00 3.00 1.50 2.00 6.00 $17.50 $25,000 15,000 7,500 10,000 30,000 $87,500

Fresh Foods, a large restaurant chain, needs to determine if it would be cheaper to produce 5,000 units of its main food ingredient for use in its restaurants or to purchase them from an outside supplier for $12 each. Cost information on internal production includes the following