Question: Scrooge Ltd is looking to outsource its accounts department. Ghost Ltd has approached Scrooge and offered to provide the service for 190,000. Scrooge Ltd ascertains

Scrooge Ltd is looking to outsource its accounts department. Ghost Ltd has approached Scrooge and offered to provide the service for £190,000. Scrooge Ltd ascertains the following costs are involved internally:

Clerical labour Supervisory labour Direct materials Variable overheads Fixed overheads 10,000 hours

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.

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

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