Question8 4 points Save Answer London Corporation currently maintains its own pr

Question

Question8 4 points Save Answer London Corporation currently maintains its own printing department. The annual costs of running this department are as follows: Variable costs Fixed costs Total .. $30,000 69,000 $ 90,000 Machin Copy Service has offered to provide Zuppa with all of its printing needs at a total annual cost of $68,000. If London went with this offer, they would close down their printing department. Except for 30% of the fixed costs, all of the annual printing department costs above can be avoided if it was dosed down Based on this information, would London be better off to keep its printing department or to shut it down and take Machin's offer and by how much? A. $4,000 better off to go with Somatic $5,000 better off to keep the department

Explanation / Answer

Avoidable fixed costs = 60000*(1-0.3) = $42000 Total relevant cost of running the department = 30000+42000 = $72000 $4000 better off to go with Somatic ( 72000-68000) Option A is correct

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