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

Question

X Company is considering outsourcing its email system. Total costs related to last month's in-house email operation, when there were 3,580 employee mailboxes, were as follows:

$12,680 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 $14.50 per mailbox. Next year, X Company estimates that 3,800 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.]

Variable costs:     Email license $17,900     Virus protection license 3,580     Miscellaneous 11,814 Fixed costs     Computer hardware 27,566

Explanation / Answer

Variable cost per unit

14,886

Email license $5 Virus protection license 1 Miscellaneous $3.3

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