TAP Q Search this course Save Check My Work (i remaining) e similar security sea

Question

TAP Q Search this course Save Check My Work (i remaining) e similar security search for $8.00 per person with an annual service contract with STE. I in a big city, can do an onine oniminal background check in-house for $1.1 8 per search with a foxed cost of $35,000. A third-party online STE's forecast is 3,100 searches next year should STE continue to do the search in-house or accept the third-perty offer? Round your answer for the breakeven quantity to the nearest whole number and round your answer for the amount of saving/loss to the nearest answer O dollar Breakeven quantity searches outsource the work, STE Check My Work (s remaining) Save

Explanation / Answer

Breakeven quantity = Fixed cost / (Difference in variable cost) = 35000 / (8-1.18) = 5131.96

Since the demand forecast is less than breakeven STE should outsource the work. STE saves

Saving =    Total cost insourcing - Outsourcing = 35000 + 1.18* 3100 - 8*3100 = $13858

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