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outsourcing

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › outsourcing

  • This topic has 3 replies, 2 voices, and was last updated 12 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 19, 2013 at 3:42 pm #126103
    aishaasad
    Member
    • Topics: 159
    • Replies: 185
    • ☆☆☆

    hello Sir,
    below is the question for decision to whether outsource or not I want to know how the relevant cost is to be calculated
    Stunnaz is considering a proposal to use the services of a press cuttings agency. At the moment, press cuttings are collected by a junior member of the marketing department, who is also responsible for office administration (including filing), travel bookings, a small amount of proof reading and making the tea. The total annual cost of employing this person is $15,000 pa. There is concern that the ability of this person to produce a comprehensive file of cuttings is limited by the time available. She has calculated that she needs to spend about two hours of her seven and a half hour day simply reading the national and trade press, but usually only has about five hours a week for this job.
    Press subscriptions currently cost $850 pa and are paid annually in advanceThe assistant makes use of a small micro-fiche device for storing cuttings. The cuttings are sent to a specialist firm once a month to be put onto fiche. Stunnaz pays $45 each month for this service. The micro-fiche reader is leased at a cost of $76 per calendar month. This lease has another 27 months to run. The cuttings service bureau has proposed an annual contract at a cost of $1,250. Several existing users have confirmed their satisfaction with the service they receive.

    Should Stunnaz outsource its press cuttings work?
    thank you

    May 19, 2013 at 4:57 pm #126109
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54682
    • ☆☆☆☆☆

    The salary of 15,000 is not relevant because presumably the person will still be paid even if we outsource (because she does other things as well).

    The press subscription of $850 would be saved, and would the $45 a month (i.e. $540 a year) making a total saving of $1390 a year.
    (The lease payments will not be saved because there is 27 months to run).

    So they should outsource the work because they will be paying $1250 and saving $1390 – a net saving.

    May 20, 2013 at 11:32 pm #126383
    aishaasad
    Member
    • Topics: 159
    • Replies: 185
    • ☆☆☆

    thank you sir i understood about salary and subscription but don’t get about micro fiche cost why to take only 12 months?

    May 21, 2013 at 6:11 am #126404
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54682
    • ☆☆☆☆☆

    I have costed everything over 12 months, and assumed that if we do not outsource then we will need to renew the lease in the future and therefore monthly cost will continue.

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