Question

Question 4 (1 point)

Each year, Sunshine Motos surveys 7,500 former and prospective customers regarding satisfaction and brand awareness. For the current year, the company is considering outsourcing the survey to Global Associates, who have offered to conduct the survey and summarize results for $30,900.Craig Sunshine, the president of Sunshine Motors, believes that Global will do a higher-quality job than his company has been doing, but is unwilling to spend more than $10,000 above the current costs. The head of bookkeeping for Sunshine has prepared the following summary of costs related to the survey in the prior year.

Mailing   $16,400                                                                     

Printing (done by Lester Print Shop)   $4,500

Salary of Pat Fisher, part-time employee who stuffed envelopes and summarized data when surveys were returned
       (100 hours X $15)  $1,500

Share of depreciation of computer and software used to track survey responses and summarized results.   $1,100

Share of electricity/phone/etc. based on square feet of space occupied by Pat Fisher vs. entire company.  $500

REQUIRED: What is the incremental cost of going outside versus conducting the survey as in the past?

Answer 1

Current Relevant Cost
Mailing	16,400
Printing	4,500
Pat Fisher	1,500
Relevant Cost	22,400
Quote from outside vendor	30,900
Increamental Cost	8,500
Acceptable increamental cost	10,000
And hence the offer from outside vendor should be accepted