Fo University Ltd is a private provider of diplomas in human resource management and is trying to decide whether to employ a new full-time staff member or whether to use casual staff paid by the hour to cover the increased demand for its courses. The costs of employing a new staff member to teach five classes for 3 hours each per week for 40 weeks per year and to perform associated assessment and administration tasks is:

Direct salary Direct oncosts Variable costs of extra office space Fixed costs of office space		$  80000 24 000 8000    24000
Total costs		$136 000
Cost per hour for casual staff		$        48

For each hour of teaching, the casual staff are also paid an hour of marking and an hour of administration at a rate of $24 per hour.

Required

Calculate whether it is more cost effective to employ a new permanent staff member or to employ casual staff on an hourly basis. What factors, other than costs, should be taken into consideration in making the final decision?