Suppose Country Cafe 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 $0.44 of ingredients, $0.28 of variable overhead (electricity run the oven), and $0.72 of direct labor for kneading and forming the loaves. Allocating fixed overhead (depreciation in the kitchen equipment and building) bases on the direct labor, County Cafe l assigns $1.05 of fixed overheard per loaf. None of the fixed costs are avoidable. The local bakery would charge $1.72 per loaf. Requirement 3. In addition to the financial analysis what else should Country Cafe consider when making this decision? Country Cafe should consider the following qualitative factors before making a final decision: A. Will the local bakery meet their delivery time requirements ? B.How does the quality and freshness of the local bakery bread compare to Country Cate bread? C. Both A and B D.None of the above

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter2: Basic Cost Management Concepts
Section: Chapter Questions
Problem 11E: Nizam Company produces speaker cabinets. Recently, Nizam switched from a traditional departmental...
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Suppose Country Cafe 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 $0.44 of ingredients, $0.28 of variable overhead (electricity run the oven), and $0.72 of direct labor for kneading and forming the loaves. Allocating fixed overhead (depreciation in the kitchen equipment and building) bases on the direct labor, County Cafe l assigns $1.05 of fixed overheard per loaf. None of the fixed costs are avoidable. The local bakery would charge $1.72 per loaf. Requirement 3. In addition to the financial analysis what else should Country Cafe consider when making this decision? Country Cafe should consider the following qualitative factors before making a final decision: A. Will the local bakery meet their delivery time requirements ? B.How does the quality and freshness of the local bakery bread compare to Country Cate bread? C. Both A and B D.None of the above
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