X Company is considering outsourcing its email system. Total costs related to la
ID: 2463056 • 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 3,650 employee mailboxes, were as follows: $13,096 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 $12.50 per mailbox. Next year, X Company estimates that 4,005 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
Particulars
Total
Fixed
Variable
Email Service
17,520
17,520
Virus Protection
4,380
4,380
-
Miscellaneous
18,980
18,980
No of Units
3,650
Cost per Unit
5.20
Comaparative Cost statement
Particualars
Own
Outsourcing
No of Units
4,005.00
4,005.00
Variable Cost per unit
5.20
12.50
Total Variable cost
20,826.00
50,062.50
Unavoidable Virus Protection
4,380.00
4,380.00
Fixed Cost
28,470.00
13,096.00
Total Cost
53,676
67,539
As inhouse making is less cost better not to outsource
Particulars
Total
Fixed
Variable
Email Service
17,520
17,520
Virus Protection
4,380
4,380
-
Miscellaneous
18,980
18,980
No of Units
3,650
Cost per Unit
5.20
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.