Bernhoff Corporation is considering outsourcing its legal work to an outside law firm.For the most recent year, the legal department incurred the following costs.

Chief Counsel 250,000

Attorneys (4) 410,000

Secretaries (3) 210,000

Interns (2) 20,000

Receptionist 30,000

Total salaries 920,000

Payroll tax 75,000

Benefits 130,000

Payroll cost 1,125,000

Occupancy 36,000

Travel 44,000

Legal research 30,000

1,235,000

Occupancy cost is allocated by the company to all departments, at the rate of $20/sqft.

It consists of: Depreciation (bldg) 55%

Tax and insurance (bldg) 8%

Maintenance 22%

Utilities 15%

Legal research refers to subscriptions to research services and publications

If the department is eliminated, one attorney will be retained as a liaison with the law firm, at a total payroll cost of $120,000. She will occupy an office of 200 sq ft.Bernhoff currently has no plans for use of the vacated space. Travel costs will be reduced by 90%, and research costs reduced by $25,000. The law firm will bill attorney costs at a rate of $420/hr, which will include support staff costs. It is expected that the first year, the law firm will bill 2,200 hours, plus $60,000 of direct costs.

Answer following Questions

a) Would Bernhoff's total expenses increase or decrease if the legal function were outsourced? Show your calculations.

b) Assume that outsourcing would decrease expense.What other factors should Bernhoff consider before making the decision to outsource?