Bobcat Scanner Company manufactures a high speed professional scanner. Its target customers are small business entrepreneurs who need the ability to easily scan their invoices and receipts. Its products are also popular with people who often use scanners to preserve personal financial information for tax purposes. In 2013 the company had sales of $106,000,000 with an average contribution margin rate of 75%. The company has its own customer call center in Albany, New York. The company is concerned that support center costs are too high and has begun considering moving the customer service center to Austin, Texas, or Bangalore, India. The current cost center employs 200 people who earn (including wages and benefits) $25 per hour and work an average of 167 hours per month. The company leases a telephone system for $100,000 per month and office space for $10,000 per month. Annual training costs are $300 per employee.

If the call center moves to Austin, Texas, they will employ 200 people and pay (including wages and benefits) $22 per hour. The cost of leasing a telephone system would be $110,000 per month, and the cost of leasing office space would be $7,500 per month. The company's training costs would be $300 per employee. The company would like its current call center employees to be willing to relocate, however they recognize that for many employees this will not be possible. The company estimates that half of its employees will decide not to use the call center. For those employees who choose not to move, the company will pay compensation equivalent to one month's salary.

If the call center moves to Bangalore, India, they will employ 350 people and pay (including wages and benefits) $7 per hour. The cost of leasing a telephone system would be $75,000 per month, and the cost of leasing office space would be $1,500 per month. The company would incur additional travel expenses to oversee operations of approximately $3,000 per month. Annual employee training costs would be $100 per employee. The company believes that if they relocate the call center to Bangalore, their customer service would decrease, leading to a 5% decrease in annual sales. In addition, the company would have to pay severance pay to current employees equal to one month's salary.

Required

a. By how much will the company's annual pre-tax income change if they decide to move the call center to Austin, Texas?

b. By how much will the company's annual pre-tax income change if they decide to move the call center to Bangalore, India?

C. What should the company do?