Assignment:
Question 1. X Company is considering outsourcing its email system. Total costs related to last month's in-house email operation, when there were 3,725 employee mailboxes, were as follows:
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Variable costs:
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Email license
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$18,625
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Virus protection license
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5,215
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Miscellaneous
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16,390
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Fixed costs
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Computer hardware
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24,585
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$10,326 of the computer hardware costs were common costs that will continue even if the email system is abandoned, and X Company will still need to pay for the virus protection license. Y Company has offered to operate an email system for X Company for $11.10 per mailbox. Next year, X Company estimates that 4,190 mailboxes will be required per month.
By how much will X Company's monthly profits change if they decide to outsource its email function to Y Company instead of managing the service internally? [A positive number means that make costs are more than buy costs; a negative number means that make costs are less than the buy costs.]