Question - BKF.com provides banks access to sophisticated financial information and analysis via the web, enabling them to instantly evaluate both personal and commercial loan applications. To better focus on its client services, BKF.com is considering outsourcing some of its internal functions. Its controller, Jenny Lee, suggests starting with the company's internal email system. She recently attended a conference and learned that GTE and NBC outsource their email function to companies such as Google and Yahoo. Lee began her analysis by identifying the total costs related to last month's in-house email operation, when there were 3,730 employee mailboxes:
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Variable Costs
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Email license
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$21,634
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Virus protection license
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3,730
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Miscellaneous
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7,460
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Fixed Costs
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Computer hardware
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29,840
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Total costs
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$62,664
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Lee analyzed the computer hardware costs further and determined that:
1. $12,234 were allocated costs that will continue even if the email system is abandoned.
2. $5,371 were non-personnel direct costs that will be avoided if the email system is abandoned.
3. $12,234 were monthly salaries for two, equally paid interns who worked only on the email system.
Mail.com, a leading provider of internet messaging outsourcing services, has offered to host BKF.com's email function for $13.80 per mailbox. BKF.com will still need to pay for the virus protection software, and it will need one of the interns to maintain the virus protection and quarantine suspicious emails. Also, a company has agreed to pay BKF.com $4,100 a month to use the computer storage space that will become available if BKF.com outsources its email function.
Finally, Lee estimates that 4,065 mailboxes will be required per month next year.
REQUIRED - By how much will BKF.com's monthly profits change if they decide to outsource its email function to Mail.com instead of managing the service internally?