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:

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.

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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