The quote from G-Art Inc. arrived. The firm was prepared to provide all the required publications work for $410,000 a year with the contract running for a guaranteed term of four years with annual renewals thereafter. If the estimated number or assumed mix of publications changed in any given year beyond the baseline planning estimates, the contract price would be adjusted accordingly. Wolfe compared G-Art's quote with the internal cost figures prepared by Myer (Table 1). Table 1. Annual cost of operating HI's publications department: Myer's figures. Materials $ 40,000 Labor $290,000 Department overhead Manager's salary $ 48,000 Allocated cost of office space $10,000 Depreciation of equipment $32,500 Other expenses (travel, education, etc.) $25.000 $115.500 $445,500 Share of company administrative overhead $ 30.000 Total cost of department for year $475,500 For instance, what will you do with the customized graphic design and printing equipment? It cost $260,000 four years ago, but you'd be lucky if you got $80,000 for it now, even though we had planned on using it for another four years at least. And then there is the sizeable supply of print materials that includes a lot of specialized ink, specialty card stock, paper, envelopes, etc. We bought the custom supplies a year ago when we were pretty flush with cash. At that time it cost us about $125,000 and at the rate we are using it now, it will last us another four years. We used up about one-fifth of it last year. As best as I can tell, Myer's figure of $40,000 for materials includes about $25,000 for these customized supplies and $15,000 for generic supplies we use on a regular basis. If we were to buy these custom supplies today it would probably cost us 110% of what we paid. But, if we try to sell it, we would probably get only 60% of what we paid for it. Wolfe thought that Myer ought to be present during this discussion. She called him in and put Richards's points to him. Myer said: I don't much like all this conjecture. I think my figures are pretty conclusive. Besides, if we are going to have all this talk about "what will happen if," don't forget the problem of space we're faced with. We're paying $12,000 a year in outside office space. If we close Richards's department, we could use the freed-up space as office space and not need to rent it on the outside.Wolfe replied: That's a good point, though I must say I'm a bit worried about the people if we close the publications department. I don't think we can nd room for any of them elsewhere in the rm. I could see whether GArt can take any of them, but some of them are getting older. There's Walters and Hines, for example. They've been with us since they left school 40 years ago, and I think their contract requires us to give them a total severance payoff of about $60,000 each, payable in equal amounts over four years. Richards showed some relief at this. \"But I still don't like Myer's gures,\" he said. \"What about the $30,000 for general administrative overhead. You surely don't expect to re anyone in the corporate ofce if I'm closed, do you?\" \"Probably not,\" said Myer, \"but someone has to pay for those costs. We can't ignore them when we look at an individual department, because if we do that with each department in turn, we will convince ourselves that accountants, lawyers, vice presidents, and the like don't have to be paid for. And they do, believe me.\" \"Well, I think we've thrashed this out pretty fully,\" said Wolfe. \"I've told G-Art that I'd let them know my decision within a week. I'll let you know what I decide to do before I write to them.\