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Maple Hotel has a chain of 100 hotels with restaurants in southern Ontario. Currently bakes specialty artisan bread for its restaurants, room services, and banquet departments in one of its main hotel kitchen. An outside supplier has offered to supply the same quality and jumbo size sociality multigrain and dry-fruit based loaf for $9.50 per loaf.

The hotel accountant has provided the following figures for producing multi-grain, dry-fruits-based specialty jumbo size loaf.

	Cost per Unit of Speciality Loaf
Direct material		$	4.00
Direct labour			1.50
Production overhead			3.64
Corporate overhead			0.70
Cost of Loaf		$	9.84

The accountant has also provided the following information:

• The Speciality Loaf can be produced using current machinery that has a capacity to produce 500,000 units month and is 50% utilized.
• The anticipated demand for the loaf will not exceed 50,000 units a month, according to the sales team.
• Half of the production overhead is fixed.
• The corporate overhead allocation is based on 17.5% of the direct materials charge.

Required:

Compute monthly net benefit of making the Loaf than buy the Loaf from the supplier. (Do not round intermediate calculations.) (Error in belowanswer box: Gameboards, instead it is Speciality Loaf)

State whether Maple Leaf hotel should make the Loaf or buy from the supplier.

multiple choice

• make

• buy

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