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What would you recommend the company do

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Question - Happy Days Bakery specializes in cakes. The company is now thinking about outsourcing the production of the cakes to a local company, allowing them to focus exclusively on decorating the cakes. The company has, on average, sold 120 cakes per month, at the following monthly costs:

Direct materials $750

Direct labor 1,200

Variable overhead 300

Fixed overhead 1,400

The fixed overhead includes the depreciation on kitchen appliances, such as mixers and ovens. The bakery would keep the equipment, using it for other products that it sells. The cake supplier the company is negotiating with is quoting a price of $20 per cake. Make a make-or-buy analysis in good form.

A) Bases upon the results, what would you recommend the company do?

B) If the company decides to buy the cakes, give at least two other factors that the company should also consider?

Reference no: EM132536904

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