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The Farm House restaurant makes their own bread to serve in their restaurant. They have...

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Accounting

imageimage The Farm House restaurant makes their own bread to serve in their restaurant. They have been approached by a local bakery offering to make the bread for them. The restaurant has two choices: 1) continue making the bread in-house, or 2) buy it from the local bakery. The Farm House head chef estimated the variable cost of making each loaf of bread to include the following: Sales prices and variable costs are as follows: $0.62 of ingredients, $0.25 of variable overhead, and direct labor costs to knead and form the loaves of $0.75. Allocating fixed overhead is based on direct labor. The Farm House assigns a fixed overhead cost of $1.15 per loaf. None of the fixed costs are avoidable. The loca bakery would charge $1.78 per loaf. 1. What is the full product unit cost of making bread in-house? 2. Should the restaurant bake the bread in-house or buy from the local bakery? (Use zero if there is no value)

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