Express Delivery Company (EDC) is considering outsourcing its Payroll Department to a payroll processing company...
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Express Delivery Company (EDC) is considering outsourcing its Payroll Department to a payroll processing company for an annual fee of $222,000. An internally prepared report summarizes the Payroll Department's annual operating costs as follows: EDC currently rents overflow office space for $38,000 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 n 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 $58,000. The Payroll Department's equipment would be transferred to other departments within the company to replace outdated equipment that would be recycled for zero salvage value.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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