KRS Ltd is considering whether to administer its own purchase ledger or

to use an external accounting service. It has obtained the following cost

estimates for each option:

Internal service department Cost Volume

Purchase hardware/software $320 pa

Hardware/software maintenance $750 pa

Accounting stationery $500 pa

Part-time account clerk $6,000 pa

External services
Processing of invoices/credit notes $0.50 per document					5,000 pa
Processing of cheque payments $0.50 per cheque					4,000 pa
Reconciling supplier accounts $2.00 per supplier					150 suppliers
per month
Determine the cost effectiveness of outsourcing the accounting
activities and identify the qualitative factors involved.