Question

Uusbon Help Suppose Seafood House restaurant is considering whether to (1) bake bread for its restaurant in-house or (2) buy the bread from a local bakery. The chestimates that are costs of making each nude $0.44 of ingredients, $0 27 of variable overhead (electricity to run the oven) and $0.79 of direct labor for reading and forming the loaves. Alocating fred overhead (depreciation on the kitchen equipment and building) based on direct labor, Seafood House assigns $1.05 of fixed overhead per loaf. None of the found costs are available. The local bakery would charge 51 72 per la Read the requirements Requirements 1. What is the unit cost of making the bread in-house? Complete the following outsourcing decision analysis to determine Seafood House's unit cost of making the bread. Seafood House Outsourcing Decision Direct material Direct labor Variable overhead Variable cost per unit Plus: Fixed overhead per unit Cost per unit Requirement 2. Should Seafood House bake the bread in-house or buy from the local bakery? Why? V since the of making each loat is Decision the cost of outsourcing each

Answer 1

Unit cost of making is as follows:
Direct Material	0.44
Direct Labor	0.79
Variable Overhead	0.27
Variable cost per unit	1.5
Plus Fixed overhead per unit	1.05
Cost per unit	2.55
Since fixed overhead is unavoidable, it will not be considerd in the variable cost of making
2.Make, Since relevant cost of making bread is lower
C.Both A and B