10.A restaurant bakes its own bread for a cost of $165 per unit (100 loaves), in
ID: 2571841 • Letter: 1
Question
10.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.
The area of accounting concerned with the effect of alternative courses of action on revenues and costs.
Prepare a differential analysis
The area of accounting concerned with the effect of alternative courses of action on revenues and costs.
dated August 16 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread, assuming 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.
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Differential Analysis
Make Bread (Alternative 1) or Buy Bread (Alternative 2)
August 16
1
Make Bread
Buy Bread
Differential Effect on Income
2
(Alternative 1)
(Alternative 2)
(Alternative 2)
3
Unit costs:
4
5
6
7
8
Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread.
The restaurant is indifferent since the result is the same regardless of which alternative is chosen.
Make the bread
Buy the bread
Required: 1. Prepare a differential analysisThe area of accounting concerned with the effect of alternative courses of action on revenues and costs.
dated August 16 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread, assuming 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.Explanation / Answer
DIFFERENTIAL ANALYSIS MAKE BREAD(ALTERNATIVE-1) OR BUY BREAD (ALTERNATIVE-2) ALTERNATIVE-1 ALTERNATIVE-2 DIFFERENTIAL EFFECT ON INCOME UNIT COST: Variable cost of manufacturing(165-46) 119 -119 Variable cost of buying bread 110 110 Variable cost of delivery 12 12 Variable cost 119 122 3 Hence, the company must:' make the bread
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