X Company is considering outsourcing its email system. Total costs related to la
ID: 2463639 • 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 3,610 employee mailboxes, were as follows: Variable costs: Email license $17,328 Virus protection license 3,610 Miscellaneous 11,913 Fixed costs Computer hardware 27,797 $12,787 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 $12.70 per mailbox. Next year, X Company estimates that 3,890 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
The montly profits of X Company will decrease by $2884 (63196 - 66080) if they decide to outsource its email function to Y Company instead of managing the service internally, as shown below:
Managing internally:
Email license = 17328 * 3890 /3610 = $18672
virus protection license = $1 * 3890 = $3890
Misl = 11913 * 3890 /3610 = $12837
Fixed costs = computer h/w =$27797
Total cost of managing internally = $63196
When outsourced the E-mail:
Service cost = 3890 * $12.70 = $49403
Common cost of computer = $12787
virus protection license = $1 * 3890 = $3890
Total cost if outsourced =$66080
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.