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Express Delivery Company $($EDC$)$ is considering outsourcing its Payroll Department to a payroll processing company for an annual fee of $$221,600.$ An internally prepared report summarizes the Payroll Department$$s annual operating costs as follows:

Supplies$ $31,600$Payroll clerks$$ salaries$121,600$Payroll supervisor$$s salary$59,600$Payroll employee training expenses$11,600$Depreciation of equipment$21,600$Allocated share of common building operating costs$16,600$Allocated share of common administrative overhead$29,600$Total annual operating cost$ $292,200$

EDC currently rents overflow office space for $$37,600$ 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 $$57,600.$

The Payroll Department$$s equipment would be transferred to other departments within the company to replace outdated equipment that would be recycled for zero salvage value.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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