In this make or buy problem, you should compute the total cost of making a particular part and the total costs of buying the same part. Try following the solutions steps:

Determine the parameters of the make cost function - the variable costs per unit and the fixed costs.

Determine the fixed costs that are avoidable and the fixed costs that are unavoidable.

Determine the buy price.

Determine the alternative use of the idle resources under the buy,

Note that the question does not ask for the total make costs and the total buy costs but instead asks for the difference between the two. Make sure that you submit the answer as a positive or a negative number as instructed. ______________________________________________________

BKF.com provides banks access to sophisticated financial information and analysis via the web, enabling them to instantly evaluate both personal and commercial loan applications. To better focus on its client services, BKF.com is considering outsourcing some of its internal functions. Its controller, Jenny Lee, suggests starting with the company's internal email system. She recently attended a conference and learned that GTE and NBC outsource their email function to companies such as Google and Yahoo. Lee began her analysis by identifying the total costs related to last month's in-house email operation, when there were 3,840 employee mailboxes:

Variable Costs
Email license	$15,360
Virus protection license	6,144
Miscellaneous	14,976
Fixed Costs
Computer hardware	34,944
Total	$71,424

Lee analyzed the computer hardware costs further and determined that:

41% were allocated costs that will continue even if the email system is abandoned.

18% were non-personnel direct costs that will be avoided if the email system is abandoned.

41% were monthly salaries for two, equally paid interns who worked only on the email system.

Mail.com, a leading provider of internet messaging outsourcing services, has offered to host BKF.com's email function for $12.50 per mailbox. BKF.com will still need to pay for the virus protection software, and it will need one of the interns to maintain the virus protection and quarantine suspicious emails. Also, another company has agreed to rent some of the computer storage space that will be available if BKF.com outsources its email function for $4,200 a month.

Finally, Lee estimates that 4,315 mailboxes will be required per month next year.

REQUIRED

By how much will BKF.com's monthly profits change if they decide to outsource its email function to Mail.com instead of managing the service internally? (Note: if the buy costs are less than the make costs, enter the difference as a positive number; if the make costs are less than the buy costs, enter the difference as a negative number.)