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Question :
Bell Video Inc. (BVI) is going to be outsourcing its information technology department (IT). If BVI outsources IT, the cost per month could be $175,000. The present total cost of IT is $250,000 per month. Of this cost, $150,000 shows salaries and benefits of employees that could be terminated if IT is outsourced. The remaining $100,000 consists of IT's share of corporate overhead that is related to IT. It is expected that only 20 percent of the corporate overhead would be eliminated if IT is outsourced. Moreover, the space which IT presently occupies could be used by the purchasing department. Presently, the purchasing department rents an office off-site for $10,000 per month. Finally, the IT department has spent $10,000 each of the last two months researching a new procurement software package. If IT is outsourced, this money spent can provide no future economic benefit.
1. Should BVI outsource IT? Justify your answer with numerical support.
2. If none of the corporate overhead would be eliminated as a result of outsourcing IT, could your answer change? Why? What type of cost is corporate overhead in this case?
3. Which of the costs would be explained as an opportunity cost? Which is a sunk cost?
On January 15, the purchaser returns $1,750 worth of paper for full credit(approved by Shah) against the bill. Should the shipment on the December 31 be recorded as a sale? Discuss the ethics of Shah's action.
Calculation of requirement of cash to be maintained and The Wallace Company must maintain a minimum cash balance of $30,000. At the beginning of February the company's cash balance was $50,000.
An analysis of a recent sale of five building sites revealed a quantity discount of 33%. How much should the selling price be multiplied by in order to determine the selling price without the discount?
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Gross increases in owner's equity that can be attributed to ongoing business activities and Equipment is purchased with a cash down payment of $60,000 and a signed note for $100,000.
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In Saint-Simon, Inc., the Assembly Department started 12,000 units and completed 14,000 units. If beginning work in process was 6,000 units, how many units are in ending work in process?
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cost of goods maufactured? direct labor cost? direct materials cost? manufacturing overhead applied? manufacturing overhead was (how much) over or under applied?
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