Free Wheels has a plant that assembles bicycles. The plant currently has a small cafeteria for...

 

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Free Wheels has a plant that assembles bicycles. The plant currently has a small cafeteria for the workers, but the kitchen equipment is in need of a sub- stantial overhaul. Free Wheels has been offered a contract by Besteats to supply food to the workers. The particulars of the situation are shown in the table. Should Free Wheels continue with the in-house food service or contract the service to Besteats? Food Service: In-House Versus Contract Food service labour (hours/year) Wage rate (real, time 1, $/hour) Overhead cost (real, time 1, S/year) Kitchen equipment first cost (current, time 0, $) Contract cost, years 1 to 3 (current $) Contract cost, years 4 to 6 (current $) Current dollar MARR Expected annual inflation rate Study period (years) 6000 15 18.000 25 000 55 000 63 700 22% 5% 6 Free Wheels has a plant that assembles bicycles. The plant currently has a small cafeteria for the workers, but the kitchen equipment is in need of a sub- stantial overhaul. Free Wheels has been offered a contract by Besteats to supply food to the workers. The particulars of the situation are shown in the table. Should Free Wheels continue with the in-house food service or contract the service to Besteats? Food Service: In-House Versus Contract Food service labour (hours/year) Wage rate (real, time 1, $/hour) Overhead cost (real, time 1, S/year) Kitchen equipment first cost (current, time 0, $) Contract cost, years 1 to 3 (current $) Contract cost, years 4 to 6 (current $) Current dollar MARR Expected annual inflation rate Study period (years) 6000 15 18.000 25 000 55 000 63 700 22% 5% 6

Answer rating: 100% (QA)

Here are the steps to analyze this decision 1 Calculate the inhouse food service labor cost f... View the full answer