Top Shelf's NED labelling department is responsible for printing product labels and attaching these to the finished spirit bottles. The department uses rented equipment and operates within one of the firm's primary production facilities.

The management accountant of Top Shelf has prepared the following snapshot of the firm's labelling department for a typical month:

Monthly production	12,500 units
Direct materials per month	$18,750
Staff (4 staff @ $6,500 per month)	$26,000
Variable overhead per month	$7,500
Equipment rental per month	$26,000
Allocated factory building depreciation and other fixed costs per month	$13,400

An external printing specialist has offered to provide bottle labelling services. The external printer will charge $4.25 per bottle. If Top Shelf accepts this offer and outsources labelling:

• Three labelling staff team members will be made redundant.
• The space currently used within the factory will be used for storage purposes.
• It will cost $2,300 per month to inspect the outputs of the external printing specialist.

Required:

1. Evaluate whether this proposal is acceptable on financial grounds. Ensure that your answer is discussed and supported by relevant calculations/workings.
2. Based on a consideration of financial, environmental and other factors, discuss whether this proposal is acceptable.