Question

Hawley Company makes decorative wedding cakes. The company is considering buying the cakes rather than baking them, which will allow it to concentrate on decorating. The company averages 100 wedding cakes per year and incurs the following costs from baking wedding cakes: (Click the icon to view the costs.) Fixed costs are primarily the depreciation on kitchen equipment such as ovens and mixers. Hawley expects to retain the equipment. Hawley can buy the cakes for $21. 11. Should Hawley make the cakes or buy them? Why? 12. If Hawley decides to buy the cakes, what are some qualitative factors that Hawley should also consider? Variable costs Direct materials i Data Table Direct labor Variable manufacturing overhead Purchase cost Direct materials Direct labor Variable manufacturing overhead 575 875 125 1,250 Total differential cost of cakes Hawley continue to make the cakes. Outsourcing will Fixed manufacturing overhead Total manufacturing cost $ 2,825 12. If Hawley decides to buy the cakes, what are some qualitative factors that Hawley should also conside Number of cakes - 100 $ 28 Cost per cake O A. Qualitative factors include separating fixed and variable costs. OB. Qualitative factors include quality and on-time delivery. OC. Qualitative factors include contribution margins of the various products produced. OD. Qualitative factors include considering sunk costs and manager's opinions. Print Done Enter any number in the edit fields and then continue to the next question.

Answer 1

Answer a

	Make	Buy	Difference
variable Cost
Material	$    575		$          575
Labor	$    875		$          875
Manufacturing Overhead	$    125		$          125
Purchase Cost		$ 2,100	$     (2,100)
Total	$ 1,575	$ 2,100	$        (525)

Hawley SHOULD continue to make the cakes. Outsourcing will increase costs and reduce profits by $ 525.

Answer b

b. Qualitative factors include quality and on-time delivery.

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