of $220,000. An internally prepared report summarizes the Payroll Department's annuai operating costs as follows:SuppliesPayroll clerks' salariesPayroll supervisor's salaryPayroll employee training expensesDepreciation of equipmentAllocated share of common building operating costsAllocated share of common administrative overheadTotal annual operating cost$ 30,000120,00058,00010,00020,00015,00028,000$ 281,000EDC currently rents overflow office space for $36,000 per year. If the company closes its Payroll Department, the employeesoccupying the rented office space could be brought in-house and the lease agreement on the rented space could be terminated withno penalty.If the Payroll Department is outsourced the payroll clerks will not be retained, however, the supervisor would be transferred to thecompany's Human Resource Management Department. As a result of this transfer, the company would discontinue its efforts to hire anew Human Resource Manager for whom it expected to pay an annual salary of $56,000.The Payroll Department's equipment would be transferred to other departments within the company to replace outdated equipmentthat would be recycled for zero salvage value.Required:What is the financial advantage (disadvantage) of outsourcing the Payroll Department?

Whenever organization to choose between whether to continue operation or close the operation of any…

Answered: Required: What is the financial…

Business

Accounting

Required: What is the financial advantage (disadvantage) of outsourcing the Payroll Department?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

of $220,000. An internally prepared report summarizes the Payroll Department's annuai operating costs as follows:
Supplies
Payroll clerks' salaries
Payroll supervisor's salary
Payroll employee training expenses
Depreciation of equipment
Allocated share of common building operating costs
Allocated share of common administrative overhead
Total annual operating cost
$ 30,000
120,000
58,000
10,000
20,000
15,000
28,000
$ 281,000
EDC currently rents overflow office space for $36,000 per year. If the company closes its Payroll Department, the employees
occupying the rented office space could be brought in-house and the lease agreement on the rented space could be terminated with
no penalty.
If the Payroll Department is outsourced the payroll clerks will not be retained, however, the supervisor would be transferred to the
company's Human Resource Management Department. As a result of this transfer, the company would discontinue its efforts to hire a
new Human Resource Manager for whom it expected to pay an annual salary of $56,000.
The Payroll Department's equipment would be transferred to other departments within the company to replace outdated equipment
that would be recycled for zero salvage value.
Required:
What is the financial advantage (disadvantage) of outsourcing the Payroll Department?

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