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Mary Thomas is the Controller for Swan Associates, a property management company in Kansas City, Missouri. Each year, Mary and payroll clerk Lindsey Jackson meet
Mary Thomas is the Controller for Swan Associates, a property management company in Kansas City, Missouri. Each year, Mary and payroll clerk Lindsey Jackson meet with the external auditors about payroll accounting. This year, the auditors suggest that Mary consider outsourcing Swan Associates' payroll accounting to a company specializing in payroll processing services. This would allow Mary and her staff to focus on their primary responsibility: accounting for the properties under management. At present, payroll requires 1.5 employee positions - payroll clerk Lindsey Jackson and a bookkeeper who spends half his time entering payroll data in the system. Mary Thomas considers this suggestion and lists the following items relating to outsourcing payroll accounting a. The current payroll software that was purchased for $4,000 three years ago would not be needed if payroll processing were outsourced. b. Swan Associates' bookkeeper would spend half his time preparing the weekly payroll input form that is given to the payroll processing service. He is paid $450 per week. c. Swan Associates would no longer need payroll clerk Lindsey Jackson, whose annual salary is $42,000. d. The payroll processing service would charge $2,000 per month Requirements 1. Would outsourcing the payroll function increase or decrease Swan's operating income? Support your answer. 2. Mary Thomas believes that outsourcing payroll would simplify her job, but she does not like the prospect of having to lay off Lindsey Jackson, who has become a close personal friend. She does not believe there is another position available for keeping Lindsey at her current salary. Can you think of other factors that might support keeping Lindsey, rather than outsourcing payroll processing? How should each of the factors affect Mary's decision if she wants to do what is best for Swan Associates and act ethically
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