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The popular Chiltern hotel operates a restaurant which makes its own food on the premises. The costs for the current production level of 500 meals are:
Cost/meal (Rs) Materials/Inputs 25.00 Labour 12.50 Variable overheads 17.50 Fixed overheads 35.00 Total costs 90.00
Ready-made meals could be bought in for Rs 77.50 per meal and, if so, the production capacity utilized at present would be unused.
Required:
Consider that there are no overriding technical considerations, should the restaurant order ready-made meals or makes its own food?
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