Q4

X Company is considering outsourcing its email system. Total costs related to last month's in-house email operation, when there were 3,595 employee mailboxes, were as follows:

Variable costs:
Email license	$20,851
Virus protection license	5,752
Miscellaneous	8,628
Fixed costs
Computer hardware	34,512

$15,876 of the computer hardware costs were common costs that will continue even if the email system is abandoned, and X Company will still need to pay for the virus protection license. Y Company has offered to operate an email system for X Company for $11.80 per mailbox. Next year, X Company estimates that 3,730 mailboxes will be required per month. By how much will X Company's monthly profits change if they decide to outsource its email function to Y Company instead of managing the service internally? [A positive number means that make costs are more than buy costs; a negative number means that make costs are less than the buy costs.]

Q5

Questions 5 and 6 refer to the following problem:

At the end of the year, a company offered to buy 4,200 units of a product from X Company for $12.00 each instead of the company's regular price of $17.00 each. The following functional income statement is for the 62,500 units of the product that X Company has already made and sold to its regular customers:

Sales		$1,062,500
Cost of goods sold		495,000
Gross margin		$567,500
Selling and administrative costs		155,625
Profit		$411,875

Fixed cost of goods sold for the year was $125,000, and fixed selling and administrative costs were $68,750. The special order product has some unique features that will require additional material costs of $0.90 per unit and the rental of special equipment for $3,000. 5. Profit on the special order would be _________?

6. Assume the following fact: regular variable selling and administrative costs include sales commissions equal to 2% of sales, but there will be no sales commissions on the special order. This will cause the special order profit to increase by _______?