X Company is considering outsourcing its email system. Total costs related to la
ID: 2462492 • Letter: X
Question
X Company is considering outsourcing its email system. Total costs related to last month's in-house email operation, when there were 3,525 employee mailboxes, were as follows:
$11,548 of the computer hardware costs were common costs that will continue even if the email system is abandoned, and X Company will still need to pay for the virus protection license. Y Company has offered to operate an email system for X Company for $13.00 per mailbox. Next year, X Company estimates that 3,720 mailboxes will be required per month.
By how much will X Company's monthly profits change if they decide to outsource its email function to Y Company instead of managing the service internally? [A positive number means that make costs are more than buy costs; a negative number means that make costs are less than the buy costs.]
Explanation / Answer
Answer: license per employee = email license/employee mailboxes
= 14805/3525 = 4.2
misc per employee = misc/employee mailboxes
=18330/3525 = 5.2
Make:
Email license: 4.2 * x = 4.2 * 3720= 15624
Misc: 5.2* x = 5.2 * 3720 =19344
FC = 27495
computer hardware Total = Mailbox + Misc + FC = 62463
Buy :
Allocated costs: 11548
Mail.com hosting charge: 13 * x = 13 * 3720 = 48360
Total = allocated costs + hosting charge = 59908
Make-buy =62463-59908=2555
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.