Self-test Many decisions for internal expenditure also make use of costing methods. In this example a company provides a canteen for teas and snacks for its employees.

Management have to make a decision based on the following:
The company can contract with an outside firm by paying them an annual fee of £18,000 or it can use its own staff which will cost £11,000 plus the cost of various food purchases of £700.
In addition, the company would have to hire certain equipment at a cost of £120 per month. This would apply irrespective of whether the company uses its own staff or a contractor.
You are required to determine which option is best for the company.