Suppose Roasted Peanuts 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 $$0\mathrm{.}52$ of ingredients, $$0\mathrm{.}23$ of

variable overhead $($electricity to run the oven$),$ and $$0\mathrm{.}76$ of direct labor for kneading and forming the loaves. Allocating fixed

overhead $($depreciation on the kitchen equipment and building$)$ based on direct labor, Roasted Peanuts assigns $$0\mathrm{.}98$ of

fixed overhead per loaf. None of the fixed costs are avoidable. The local bakery would charge $$1\mathrm{.}82$ per loaf.

Read the

Requirements $1.$ What is the unit cost of making the bread in$-$house?

Complete the following outsourcing decision analysis to determine Roasted Peanuts's unit cost of making the bread.

Roasted Peanuts

Outsourcing Decision

Direct material

Direct labor

Variable overhead

Variable cost per unit

Plus: Fixed overhead per unit

Cost per unit