Scrooge Ltd is looking to outsource its accounts department. Ghost Ltd, has approached Scrooge and offered to provide the service for £160,000. Scrooge Ltd ascertains the following costs are involved internally.

Clerical labour 10,000 hours at £5 Supervisory labour 6,000 hours at £10 Direct materials £25,000 Variable overheads £3 per clerical labour hour Fixed overheads £8,000 Required:

Calculate whether or not Scrooge Ltd should accept Ghost’s bid. State any assumptions you have made and other factors you might take into account.