Express Delivery Company (EDC) is considering outsourcing its Payroll Department to a payroll processing company for an annual fee of $222,400. An internally prepared report summarizes the Payroll Department's annual 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 $ 32,400 122,400 60,400 12,400 22,400 17,400 30,400 $ 297,800 EDC currently rents overflow office space for $38,400 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 that it expected to pay an annual salary of $58,400. The Payroll Department's equipment would be transferred to other departments within the company to replace outdated equipment that would be recycled for zero salvage value.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?

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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ABC, Inc. has the following information available regarding costs at various levels of monthly production: Production volume 8,000 12,000 Direct materials $75,000 $70,000 Direct labor 56,000 80,000 Packaging materials 22,000 30,000 Supervisors' salaries 14,000 14,000 Depreciation on plant and equipment 11,000 11,000 Maintenance 31,000 45,000 Utilities 15,000 21,000 Insurance on plant and equipment 2,600 2,600 Property taxes on plant and equipment…
1. FAN Company has the following data for the year 2021 (in thousand) January 1, 2021 December 31, 2021 Raw Materials Inventory $16,300 $15,000 Work-in-process Inventory $40,000 $40,110 Finished Goods Inventory $49,600 $44,256 During 2021 the amount of raw material purchased was $21,700 and direct labor costs incurred were $10,100. The finance department also provides the following additional data : Factory Machinery Rent $ 1,840 Indirect Materials $ 3,400 Delivery Expense $ 760 Factory Utilities $ 1,200 Depreciation on Factory Building $ 3,500 Sales Commissions $ 340 Administrative Expense 1,620 Factory Insurance $ 1,266 Sales Revenue $ 98,600 Factory Manager's Salary $ 2,240 Indirect Labor $ 5,670 Instructions: b. Prepare an Income Statement for the year ended 2021! %24
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1. FAN Company has the following data for the year 2021 (in thousand) January 1, 2021 December 31, 2021 Raw Materials Inventory $16,300 $15,000 Work-in-process Inventory $40,000 $40,110 Finished Goods Inventory $49,600 $44,256 During 2021 the amount of raw material purchased was $21,700 and direct labor costs incurred were $10,100. The finance department also provides the following additional data : Factory Machinery Rent $ 1,840 Indirect Materials $ 3,400 Delivery Expense $ 760 Factory Utilities $4 1,200 Depreciation on Factory Building $ 3,500 Sales Commissions $ 340 Administrative Expense $ 1,620 Factory Insurance $ 1,266 Sales Revenue $ 98,600 Factory Manager's Salary $ 2,240 Indirect Labor $ 5,670 Instructions: c. Assume that FAN Company's accounting records show the balance of the following current asset accounts on December 31, 2021 (in thousand): Cash $110,250 Accounts Receivable $ 12,440 Prepaid Expenses $9,250 Supplies $ 500 Short-Term Investment $ 550 Prepare the current…
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Tasman Products has a Maintenance Department that services equipment in the company's Forming Department and Assembly Department. The cost of this servicing is charged to the operating departments based on machine-hours. Data for the Maintenance Department follow: Variable costs for lubricants Fixed costs for salaries and other Budget $ 261,000* Actual $ 215,000 $ 333,300 $ 231,500 *Budgeted at $18 per machine-hour. Data for the Forming and Assembly Departments follow: Percentage of Peak- Forming Department Assembly Department Total Machine-Hours Period Capacity Required Budget Actual 74% 9,700 11,700 26% 100% 4,800 3,800 14,500 15,500 The amount of fixed costs in the Maintenance Department is determined by peak-period requirements. Required: 1. How much Maintenance Department cost should be charged to the Forming Department and to the Assembly Department? 2. How much, if any, of the Maintenance Department's actual costs should be treated as a spending variance and not charged to the…
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