Chapter 25, Problem P25.34CP

To determine

Differential analysis:

Differential analysis is concerned with determining increase or decrease in the operating income due to change in cost of the company. The decision under differential analysis is made depending on the favorable effect on the cost and profit

To determine:

1. The differential analysis to determine whether the company should replace the employee or outsource the payroll function.

2. The other factors to be considered in making this decision.