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

Simcoe Hotel Laundry Production Costs For the Year Ended December 31, 2020
	Per kg	7,000 kg
Direct Materials	$4.00	$28,000
Direct Labour	$10.00	$70,000
Housekeeping Supervisor	$9.00	$63,000
Depreciation of laundry equipment	$1.00	$7,000
Allocated Fixed Costs	$7.00	$49,000
Total Cost	$31.00	$217,000

An external company has offered to process 7,000 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 supervisors annual salary will drop to $56,700.

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 (7,000 kg)
		In-house	Outsource	In-house	Outsource
Direct Materials	$4.00	$Answer	$Answer	$Answer	$Answer
Direct Labour	$10.00	$Answer	$Answer	$Answer	$Answer
Housekeeping Supervisor	$9.00	$Answer	$Answer	$Answer	$Answer
Depreciation of Laundry Equipment	$1.00	$Answer	$Answer	$Answer	$Answer
Allocated Fixed Costs	$7.00	$Answer	$Answer	$Answer	$Answer
Outsource Price		$Answer	$Answer	$Answer	$Answer
Total Relevant Cost	$31.00	$Answer	$Answer	$Answer	$Answer

The company should: AnswerOutsourceKeep in-house