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12/12/23, 10:56 PM Chapter 9 Post-Class Homework https://www.ameengage.com/mod/quiz/review.php?attempt=4739652&cmid=1260546&page=4 1/3 Dashboard / My courses / [Seneca 09/2023] HTM440NHA - Nardi / CHAPTER 9 - Relevant Costs and Business Strategies / Chapter 9 Post-Class Homework

12/12/23, 10:56 PM Chapter 9 Post-Class Homework https://www.ameengage.com/mod/quiz/review.php?attempt=4739652&cmid=1260546&page=4 2/3 Question 5 Partially correct Mark 1.00 out of 15.00 Take me to the text Simcoe 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. Simcoe Hotel Laundry Production Costs For the Year Ended December 31, 2020 Per kg 12,000 kg Direct Materials $5.00 $60,000 Direct Labour $10.00 $120,000 Housekeeping Supervisor $8.00 $96,000 Depreciation of laundry equipment $5.00 $60,000 Allocated Fixed Costs $6.00 $72,000 Total Cost $34.00 $408,000 An external company has offered to process 12,000 kg of laundry per year at a price of $20 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 $86,400. 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 (12,000 kg) In-house Outsource In-house Outsource Direct Materials $5.00 $ $ $ $ Direct Labour $10.00 $ $ $ $ Housekeeping Supervisor $8.00 $ $ $ $ Depreciation of Laundry Equipment $5.00 $ $ $ $ Allocated Fixed Costs $6.00 $ $ $ $ Outsource Price $ $ $ $ Total Relevant Cost $34.00 $ $ $ $ The company should:  Keep in-house Explanation Limestone Hotel Laundry Outsource Analysis Production Cost Per kg Per kg Differential Cost Per kg Differential Cost In-house Outsource In-house Outsource Direct Materials $5.00 $5.00 $60,000