X Company to considering outsourcing its email system. Total costs related to lu

Question

X Company to considering outsourcing its email system. Total costs related to lust month's In-house email operation, when there were 3,825 employee mailboxes, were as follows: $13,801 of the computer hardware cost* were common costs that will continue even if the email system abandoned, and X Company will still need to pay for the virus protection bceosr Y Company ban offered to operate an email system I* X Company tor til.90 per mailbox Next year, X Company estimates that 4.080 mailboxes will be required per month By how much will X Company's monthly profits changc If they decide to outsource its email function to Y Company instead of manajpec the service Internally? (A positive number means that make coats are more than buy costs; a negative number means that make costs are has than the buy costs.

Explanation / Answer

B -2,581 Statement showing computations Particulars Make Outsource Difference Variable Costs: Email License = 16065/3825 * 4080                  17,136.00                              17,136.00 Virus Protection License    Miscellaneous= 8415/3825 * 4080                    8,976.00                                8,976.00 Purchase Costs = 4080*11.90                        48,552.00                           (48,552.00) Fixed Costs: Computer Hardware                  19,859.00                              19,859.00 Total Costs                  45,971.00                        48,552.00                              (2,581.00)

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