Question

$02/03$

Calculate and compare the forecast total accounting costs in the year following MEXIT under the outsource option $($B$)$; to assess which option will be most economical for Telford Engineering in the future.

Enter the accountancy department costs for Option B $($to the nearest $M$\text{'}000).$ For your answer only provide the first three numbers and do not include any symbols, for example, $"543$"Option B

Outsourcing

Telford Engineering has identified a global business services partner off$-$shore. The annual cost of outsourcing the accounting function per annum is forecast to be $$292,000.$ The GBS Company will take over the highly systemised and transactional operations

of payables, receivables, payroll and credit control. Long$-$term asset and treasury and cash management will remain in$-$house.

Outsourcing would take place immediately following MEXIT $($in about one year$$s time$)$ and annual outsourcing costs are estimated to remain constant over time. The total cost of making the staff redundant under the outsource option is estimated to be $25\%$

of their current annual salaries. Outsourcing would mean that $40\%$ of the other non$-$staff accounting department costs could be saved each year.

The retained skeleton staff, post$-$outsourcing, will be paid at $20\%$ more than their current salaries.

Note: The remaining staff to be retained under the Outsource Option will be as follows:

Head of Accounting $($unchanged salary$)+2$ Fully Qualified $($FQ$)$ Accountants and one Part Qualified $($PQ$)$ Accountant