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Express Delivery Company $($EDC$)$ is considering outsourcing its Payroll Department to a payroll processing company for an annual fee of $$223,200.$ An internally prepared report summarizes the Payroll Department$$s annual operating costs as follows:

Supplies $ $33,200$

Payroll clerks$$ salaries $123,200$

Payroll supervisor$$s salary $61,200$

Payroll employee training expenses $13,200$

Depreciation of equipment $23,200$

Allocated share of common building operating costs $18,200$

Allocated share of common administrative overhead $31,200$

Total annual operating cost $ $303,400$

EDC currently rents overflow office space for $$39,200$ 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$$s Human Resource Management Department. As a result of this transfer, the company would discontinue its efforts to hire a new Human Resource Manager for whom it expected to pay an annual salary of $$59,200.$

The Payroll Department$$s equipment would be transferred to other departments within the company to replace outdated equipment that would be recycled for zero salvage value.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