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Express Delivery Company ( EDC ) is considering outsourcing its Payroll Department to a payroll processing company for an annual fee of $ 2 2

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Express Delivery Company (EDC) is considering outsourcing its Payroll Department to a payroll processing company
for an annual fee of $220,000. An internally prepared report summarizes the Payroll Department's annual operating
costs as follows:
EDC currently rents overflow office space for $36,000 per year. If the company closes its Payroll Department, the
employees occupying the rented office space could be brought in-house and the lease agreement on the rented
space could be terminated with no penalty.
If the Payroll Department is outsourced the payroll clerks will not be retained; however, the supervisor would be
transferred to the company's Human Resource Management Department. As a result of this transfer, the company
would discontinue its efforts to hire a new Human Resource Manager for whom it expected to pay an annual salary
of $56,000.
The Payroll Department's equipment would be transferred to other departments within the company to replace
outdated equipment that would be recycled for zero salvage value.
Required:
What is the financial advantage (disadvantage) of outsourcing the Payroll Department?
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