$4-36.$Hudson University $($HU$)$ has just received a proposal from Speak and Tell $($S&T$),$ a New York public relations firm. Under the terms of the proposal, S&T has offered to meet all HU$$s external media relations needs at a fixed cost of $$750,000$ per year. These activities are currently performed by HU staff. The expenses associated with the media relations department during the current year were as follows:

Staff salaries: $$650,000$ including a senior staff member who is paid $$80,000$ and who will remain on staff to oversee HU$$s interests in dealings with the public relations firm. All other staff would be let go$.$ HU incurs additional costs for health care and other benefits at a rate of $30$ percent of staff salaries.

Fixed equipment: The computers and media equipment in the department were purchased $4$ years ago. They cannot be used by any other department at HU and cannot be sold. Depreciation expenses from the equipment are $$20,000$ per year. The net book value of the equipment is $$60,000.$

Printing costs: If HU contracts out, it will no longer have to print external media documents, which cost $$150,000$ this year.

Which of the costs listed above should be included in HU$$s consideration of the proposal? Why should they be included?

Based solely on financial considerations, should HU accept the contract? Why?