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Make or Buy A restaurant bakes its own bread for a cost of $156 per unit (100 loaves), including fixed costs of $30 per unit. A proposal is offered to purchase bread from an outside source for $103 per unit, plus 511 per unit for delivery. Prepare a differential analysis dated July 7 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread, assuming that fixed costs are unaffected by the decision. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Make Bread (Alt. 1) or Buy Bread (Alt. 2) July 7 Make Bread Buy Bread Differential Effect (Alternative 1) (Alternative 2) on Income (Alternative 2) Sales price Unit Costs: Purchase price Delivery Variable costs Fixed factory overhead Income (Loss) Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread. Replace Equipment A machine with a book value of $250,800 has an estimated six-year life. A proposal is offered to sell the old machine for $218,000 and replace it with a new machine at a cost of $281,300. The new machine has a six-year life with no residual value. The new machine would reduce annual direct labor costs from $50,300 to $40,200. Prepare a differential analysis dated October 3 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) October 3 Continue with Replace Old Differential Effect Old Machine Machine on Income (Alternative 1) (Alternative 2) (Alternative 2) Revenues: Proceeds from sale of old machines Costs: Purchase price Direct labor (6 years) Income (Loss) Should the company continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)

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