Question

$25. Grimm Company makes decorative wedding cakes. The company is considering Fixed costs are primarily the depreciation on kitchen equipment such as ovens buying the cakes rather than baking them, which will allow it to concentrate on and mixers. Grimm expects to retain the equipment. Grimm can buy the cakes for decorating. The company averages 100 wedding cakes per year and incurs the following costs from baking wedding cakes: B (Click the icon to view the costs.) 11. Should Grimm make the cakes or buy them? Why? 12. If Grimm decides to buy the cakes, what are some qualitative factors that Grimm should also consider? Cake costs cakes cakes makeoutsource) Variable costs: Direct materials i Data Table Direct labor Variable manufacturing overhead Purchase cost Direct materials Direct labor Variable manufacturing overhead Total differential cost of cakes 500 1,000 200 1,200 Grimm continue to make the cakes. Outsourcing will Fixed manufacturing overhead Total manufacturing cost 12. If Grimm decides to buy the cakes, what are some qualitative factors that Grimm should also consider 2,900 100 Number of cakes Cost per cake O A. Qualitative factors include considering sunk costs and manager's opinions. O B. Qualitative factors include separating fixed and variable costs. OC. Qualitative factors include contribution margins of the various products produced. O D. Qualitative factors include quality and on-time delivery. Print Done Enter any number in the edit fields and then continue to the next question.

Answer 1

Grimm Company
	Make cakes	Outsource cakes	Make - outsource
DM	500		500
DL	1000		1000
Var. Mfg. OH	200		200
Purchase price ( $ 25 * 100 cakes )		2500	-2500
Total differential Cost	1700	2500	-800
Grimm should continue to make the cakes. Outsourcing will reduce the income by $ 800.
Answer 12
option D is correct.