Please explain how you got the figure of $$4,000,000$ for the total fixed costs. Please show complete calculation. tep $4$ :

$2.$ If Sportz decides to outsource its Information Technology needs, the company has to pay $$97\mathrm{.}50$ per hour for the $24,000$ hours of IT services it needs, for a total outlay of $$2,340,000.$ In return, Sportz saves $30\%$ of the IT department$$s fixed costs $($$$4,000,000\backslash$times $0\mathrm{.}30=$ $$1,200,000).$ The issue then is how much it saves in variable costs. The key is to recognize that Sportz saves more than the $$1,200,000$ of variable costs assigned to IT because of the interlinks between the IT and HR groups. To quantify this, we have to calculate the reciprocated cost of the IT department using the variable costs alone.

IT $=$ $$1,200,000+0\mathrm{.}23$ HR

HR $=$ $ $800,000+0\mathrm{.}25$ IT

IT $=$ $$1,200,000+0\mathrm{.}23($$$800,000+0\mathrm{.}25$ IT$)$

IT $=$ $$1,384,000+0\mathrm{.}0575$ IT

$0\mathrm{.}9425$ IT $=$ $$1,384,000$

IT $=$ $$1,468,435$

Sportz$$s total savings therefore amount to $$1,200,000+$ $$1,468,435=$ $$2,668,435,$ which exceeds the direct outsourcing payment of $$2,340,000.$ Therefore, on financial grounds alone, Sportz should outsource its Information Technology services.