Outsourcing, ethics Hollenberry, Inc. is a successful mail-order catalog busi¬ ness with customers worldwide. The company's headquarters are in a small town some distance from any major metropolitan area. Sales have grown steadily over the years, and the call center facilities are currently inadequate for the sales vol¬ ume. Management is comparing two alternatives: Expand the call center facili¬ ties or outsource the call center operations to a company specializing in such operations. If the call center is outsourced, most of the current employees would lose their jobs because they do not wish to relocate to the new call center loca¬ tion, close to a major metropolitan area. Many of the employees have been with Hollenberry for over 20 years. Regardless of where the call center is located, customers will call a toll-free phone number. If the call center is outsourced, however, more multilingual operators would be available. Hollenberry has iden¬ tified the following costs:

If the call center is outsourced, the related office equipment would be sold to the new call center operations for $20,000. The equipment was originally purchased at a cost of $100,000. The building will no longer be rented, and call center em¬ ployees will have the opportunity to transfer to the outside call center, in which case their salaries will be paid by the outside call center. The other support costs are associated with maintaining the building and office equipment for the cur¬ rent call center.
If Hollenberry outsources the call center and the same number and pattern of calls occurs next year, Hollenberry will pay the new cost center firm $700,000 for the year.
REQUIRED

(a) What costs are relevant for the decision on outsourcing the call center?

(b) What qualitative factors are important in this decision?

(c) What should Hollenberry do? Provide reasons for your recommendation.

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Cost of In-House Call Center: Labor $650,000 Building rent 60,000 Phone charges 35,000 Other support costs 42,000