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.

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?