Cal’s Carpentry is considering outsourcing its accounts receivable function. Cur

Question

Cal’s Carpentry is considering outsourcing its accounts receivable function. Currently, Cal employs two full-time clerks and one part-time clerk to manage accounts receivables. Each full-time clerk has an annual salary of $36,000 plus fringe benefits costing 30 percent of their salary. The part-time clerk makes $18,000 per year but has no fringe benefits. Total salary plus fringe cost is $111,600. Cal estimates that each account receivable incurs a $10 variable cost. The Small Business Accounts Receivables Group (SBARG) specializes in handling accounts receivable for small- to medium-size companies. Doris Roberts from SBARG has offered to do the account receivables for Cal’s Carpentry at a fixed cost of $75,000 per year plus $30 per account receivable. Next year, Cal expects to have 2000 accounts receivables.

What other alternatives might Cal consider in terms of his current staffing for accounts receivable?

What additional criteria should Cal consider before outsourcing the accounts receivable?

Explanation / Answer

ans 1: what cal actually should do here is that cal may want to seek an opportunity to some how reduce this variable cost of $10, since a small fractions of reduction in this variable cost will help in greater sense in reducing the overall cost, becasue total cost increases as veriable cost per unit increases, another think what i believe cal can do is to include some part timers.

Ans 2: before outsourcing the account to SBARG, they should do the proper analysis on SBARG, like how is the SBARG doing, what is the furture prospect of SBARG, also there should be thinking on the reliability of SBARG to their own staff, how reliable they are compared to their won staff.

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