(Solved): Express Delivery Company (EDC) is considering outsourcing its Payroll Department to a payroll proces ...

Express Delivery Company (EDC) is considering outsourcing its Payroll Department to a payroll processing company for an annual fee of $223,400. An internally prepared report summarizes the Payroll Department’s annual operating costs as follows:

Express Delivery Company (EDC) is considering outsourcing its Payroll Department to a payroll processing company for an annual fee of $223,400. 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 $ 33,400 123,400 61,400 13,400 23,400 18,400 31,400 $ 304,800 EDC currently rents overflow office space for $39,400 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 hir a new Human Resource Manager that it expected to pay an annual salary of $59,400. The Payroll Department's equipment would be transferred to other departments within the company to replace outdated equipment that would be recycled for zero salvage value. Financial advantage of outsourcing Required: What is the financial advantage (disadvantage) of outsourcing the Payroll Department?