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

$$224,000.$ An internally prepared report summarizes the Payroll Department's annual operating costs as follows:

EDC currently rents overflow office space for $$40,000$ 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 that it expected to pay an annual salary of $$60,000.$

The Payroll Department's equipment would be transferred to other departments within the company to replace outdated equipment that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?