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?