Limestone Hotel currently launders all of its towels and sheets in the basement of the hotel. The company$$s accounting department has reported the following annual costs of laundering internally.

Limestone Hotel

Laundry Production Costs

For the Year Ended December $31,2020$

Per kg $11,000$ kg

Direct Materials $$5\mathrm{.}00$ $$55,000$

Direct Labour $$8\mathrm{.}00$ $$88,000$

Housekeeping Supervisor $$10\mathrm{.}00$ $$110,000$

Depreciation of laundry equipment $$4\mathrm{.}00$ $$44,000$

Allocated Fixed Costs $$7\mathrm{.}00$ $$77,000$

Total Cost $$34\mathrm{.}00$ $$374,000$

An external company has offered to process $11,000$ kg of laundry per year at a price of $$16$ per kg$.$

Also consider the following information:

The laundry equipment has no salvage value and has no other use aside from processing the laundry. It cannot be sold.

The fixed costs allocated to the laundry are common to the whole housekeeping department.

The supervisor will take over duties in another department if the laundry is processed at the external company. If this is the case, the supervisor$$s annual salary will drop to $$99,000.$

Should the company continue to process laundry internally or begin using the external company?

Do not enter dollar signs or commas in the input boxes.

Round all answers to $2$ decimal places.

Limestone Hotel

Laundry Outsource Analysis

Production Cost Per kg Per kg Differential Cost Total Differential Cost $(11,000$ kg$)$

In$-$house Outsource In$-$house Outsource

Direct Materials $$5\mathrm{.}00$ $

Answer

$

Answer

$

Answer

$

Answer

Direct Labour $$8\mathrm{.}00$ $

Answer

$

Answer

$

Answer

$

Answer

Housekeeping Supervisor $$10\mathrm{.}00$ $

Answer

$

Answer

$

Answer

$

Answer

Depreciation of Laundry Equipment $$4\mathrm{.}00$ $

Answer

$

Answer

$

Answer

$

Answer

Allocated Fixed Costs $$7\mathrm{.}00$ $

Answer

$

Answer

$

Answer

$

Answer

Outsource Price $

Answer

$

Answer

$

Answer

$

Answer

Total Relevant Cost $$34\mathrm{.}00$ $

Answer

$

Answer

$

Answer

$

Answer

The company should:

Answer