Structuring an Outsourcing Problem Recently, Claude Manufacturing was approached by a firm that is offering to provide accounting and tax services for $500,000 annually. Historically, Claude Manufacturing has completed these tasks in-house and must now decide if the company should continue with this process or accept the supplier's offer. By accepting the firm's offer, Claude Manufacturing can save 60 percent of fixed expenses in addition to relevant labour and variable expenses. To evaluate this decision, Claude Manufacturing gathered the following annual cost information for the accounting and tax services department: Total Cost Direct labour Variable overhead Fixed overhead Total Required: 1. List the relevant cost(s) of internally providing the services and externally purchasing from another organization. The input in the box below will not be graded, but may be reviewed and considered by your instructor. 2. Which alternative is more cost effective. $225,000 62,500 325,250 $612,750 By how much? 3. At what cost of outsourcing would Claude Manufacturing be indifferent between providing the services in-house and outsourcing to another company? 4. What other factors should Claude Manufacturing consider before deciding to outsource these services? The input in the box below will not be graded, but may be reviewed and considered by your instructor.
Structuring an Outsourcing Problem Recently, Claude Manufacturing was approached by a firm that is offering to provide accounting and tax services for $500,000 annually. Historically, Claude Manufacturing has completed these tasks in-house and must now decide if the company should continue with this process or accept the supplier's offer. By accepting the firm's offer, Claude Manufacturing can save 60 percent of fixed expenses in addition to relevant labour and variable expenses. To evaluate this decision, Claude Manufacturing gathered the following annual cost information for the accounting and tax services department: Total Cost Direct labour Variable overhead Fixed overhead Total Required: 1. List the relevant cost(s) of internally providing the services and externally purchasing from another organization. The input in the box below will not be graded, but may be reviewed and considered by your instructor. 2. Which alternative is more cost effective. $225,000 62,500 325,250 $612,750 By how much? 3. At what cost of outsourcing would Claude Manufacturing be indifferent between providing the services in-house and outsourcing to another company? 4. What other factors should Claude Manufacturing consider before deciding to outsource these services? The input in the box below will not be graded, but may be reviewed and considered by your instructor.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
A 100.
Transcribed Image Text:Structuring an Outsourcing Problem
Recently, Claude Manufacturing was approached by a firm that is offering to provide accounting and tax services for $500,000 annually. Historically, Claude Manufacturing has completed these tasks in-house and must now decide if the company
should continue with this process or accept the supplier's offer. By accepting the firm's offer, Claude Manufacturing can save 60 percent of fixed expenses in addition to relevant labour and variable expenses. To evaluate this decision, Claude
Manufacturing gathered the following annual cost information for the accounting and tax services department:
Total Cost
Direct labour
Variable overhead
Fixed overhead
Total
Required:
1. List the relevant cost(s) of internally providing the services and externally purchasing from another organization.
The input in the box below will not be graded, but may be reviewed and considered by your instructor.
2. Which alternative is more cost effective.
$225,000
62,500
325,250
$612,750
By how much?
3. At what cost of outsourcing would Claude Manufacturing be indifferent between providing the services in-house and outsourcing to another company?
$
4. What other factors should Claude Manufacturing consider before deciding to outsource these services?
The input in the box below will not be graded, but may be reviewed and considered by your instructor.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education