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Identify and briefly discuss ONE (1) qualitative factor that Leisurely Lunch Bakery should investigate before...

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Accounting

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Identify and briefly discuss ONE (1) qualitative factor that Leisurely Lunch Bakery should investigate before deciding to outsource the production of the cakes.

On the basis of financial considerations alone, determine and briefly discuss whether Leisurely Lunch Bakery should continue to make the cakes or purchase the cakes from Scrumptious Cakes. Provide supporting calculations.

Make or Buy Leisurely Lunch Bakery prepares and sells a variety of lunch sandwiches, pies and cakes. The costs associated with producing 3,040 cakes per year are as follows: Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead $ 58,800 15,500 7,200 9,500 $ 91,000 Scrumptious Cakes has offered to supply the 3,040 cakes to Leisurely Lunch Bakery for $28.00 per cake. If Leisurely Lunch Bakery accepts Scrumptious Cakes' offer, Leisurely Lunch Bakery would eliminate 20 per cent of the fixed overhead applied to the cakes

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