Question

A restaurant bakes its own bread for a cost of $165 per unit (100 loaves), including fixed costs of $46 per unit. A proposal is offered to purchase bread from an outside source for $110 per unit, plus $12 per unit for delivery.
Required:
1.   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. Refer to the list of Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required.
2.   Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread.

Score: 18/105

Differential Analysis

Make Bread (Alternative 1) or Buy Bread (Alternative 2)

July 7

1		Make Bread	Buy Bread	Differential Effect on Income
2		(Alternative 1)	(Alternative 2)	(Alternative 2)
3
4	Unit costs:
5
6
7	✔
8
9

Answer 1

Differential Analysis
Make Bread (Alternative 1) or Buy Bread (Alternative 2)
7-Jul
	Make Bread	Buy Bread	Differential Effect on Income
Unit costs:	(Alternative 1)	(Alternative 2)	(Alternative 2)
Purchase Price	$                                            -	$   (110.00)	$   (110.00)
Delivery	$                                            -	$     (12.00)	$     (12.00)
Variable cost  ($165 - $46)	$                                  (119.00)	$            -	$     119.00
Fixed overhead cost	$                                    (46.00)	$     (46.00)	$            -
Income/(loss)	$                                  (165.00)	$   (168.00)	$       (3.00)
The company should make the bread.