Suppose Italian Eatery restaurant is considering whether to (1) bake bread for its restaurant in-house...
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Accounting
Suppose Italian Eatery restaurant is considering whether to bake bread for its restaurant inhouse or buy the bread from a local bakery. The chef estimates that variable costs of making each loaf include $ of ingredients, $ of variable overhead electricity to run the oven and $ of direct labor for kneading and forming the loaves. Allocating fixed overhead depreciation on the kitchen equipment and building based on direct labor, Italian Eatery assigns $ of fixed overhead per loaf. None of the fixed costs are avoidable. The local bakery would charge $ per loaf.
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Dose Italian Eatery restaurant is considering whether to bake bread for its restaurant inhouse or buy the nates that variable costs of making each loaf include $ of ingredients, $ of variable overhead electricity heading and forming the loaves. Allocating fixed overhead depreciation on the kitchen equipment and building
Requirements
What is the full product unit cost of making the bread inhouse?
Should Italian Eatery bake the bread inhouse or buy from the local bakery? Why?
In addition to the financial analysis, what else should Italian Eatery consider when making this decision?
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