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Structuring Make-or Buy Problem Fresh Foods, a large restaurant chaineds to determine if it would be cheaper to reduce 5.000 unit of main food ingredient for use in its restaurants or to purchase them from an outside wolier for 313 each cost information on internal production includes the following Total Cost Unit Cost Direct materials 125.000 35.00 Direct labor I5.000 3.00 Variable manufacturing ovechand 7,500 1.50 Variable marketing svernet 12,000 Fixed plant overhead 30,000 6.00 240 Tota $89.500 517.90 Fived overhead will continue whether the ingredient is produces internally or externally. No additional costs of purchasing wil be incurred beyond the purchase price. If required, round your answers to the nearest whole number Required: 1. What are the alternatives for Fresh Foods? Make the ingredient in house or buy it externally 2. List the relevant cout(e) of internal production and of external purchase All of the above 3. Which alternative is more cost effective and by how much? (Use total cost when giving your answer) SX 90,000 x 4. Now assume that 20% of the fixed overhead can be avoided if the ingredient is purchased externally. Which alternative is more cost effective and by how much? (Use total cost when giving your answer.) Buy 84,000 X

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