1.A local nursing home provides its own laundry services. The director would like to outsource this service and has found a company that will provide the service for $54 per hour. The following information has been collected about the cost per hour to the nursing home for performing its own laundry services:

Cost per hour of service:

Laundry supplies (e.g. laundry soap) $5

Direct Labour cost $32

Variable overhead $2

Total hours of laundry services per year: 4000

Total fixed overhead 40,000

Determine whether the nursing home should outsource housekeeping, assuming that 75% of fixed costs can be eliminated if the service is outsourced. Provide calculations.