Suppose Bourbon 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 loaf include $0.54 of ingredients, $0.26 of variable overhead (electricity to run the oven), and $0.71 of direct labor for kneading and forming the loaves. Allocating fixed overhead (depreciation on the kitchen equipment and building) based on direct labor, Bourbon House assigns $1.04 of fixed overhead per loaf. None of the fixed costs are avoidable. The local bakery would charge $1.80 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 Bourbon House's unit cost of making the bread. Bourbon House Outsourcing Decision Direct material Direct labor Variable overhead Variable cost per unit Plus: Fixed overhead per unit Cost per unit Requirement 2. Should Bourbon House bake the bread in-house or buy from the local bakery? Why? Decision: since the of making each loaf is the cost of outsourcing each loaf. Requirement 3. In addition to the financial analysis, what else should Bourbon House consider when making this decision? Bourbon House should consider the following qualitative factors before making a final decision: O A. Will the local bakery meet their delivery time requirements? O B. How does the quality and freshness of the local bakery bread compare to Bourbon House bread? O C. Both A and B O D. None of the above - X Requirements 1. What is the full product unit cost of making the bread in-house? 2. Should Bourbon House bake the bread in-house or buy from the local bakery? Why? 3. In addition to the financial analysis, what else should Bourbon House consider when making this decision? Print Done