Boise’s Outsourcing Decision Assignment

Boise, a division of Price Enterprises, currently performs computer services for various departments of the firm. One of the services has created a number of operating problems, and management is exploring whether to outsource the service to a consultant. Traceable variable and fixed operating costs total $92,000 and $37,000, respectively, in addition to $30,000 of corporate administrative overhead allocated from Price. If Boise were to use the outside consultant, fixed operating costs would be reduced by 70%. The irrelevant costs in Boise’s outsourcing decision total:

Multiple Choice

• $25,900.
• $30,000.
• $37,000.
• $41,100.
• None of the answers is correct.