f) Assume that the depreciation expense on the customer call center equipment is $40,000.

An
outsourcing company offers to provide the same level (i.e., attending 100,000 calls a year) and
quality of service for $480,000. Should the bank outsource its call center service based on just
these numbers and the other data given in the case? You may ignore the qualitative and
longterm concerns related to outsourcing and view this as a single-shot decision.

The salary of customer representative at call center(Exhibit B) $450,000

Assume the depreciation expenses : . . $40,000

Total cost $490,000

The total 100,000 calls for a year with quality service . $480,000
. ------------------
Different $10,000
If only based on just these numbers and the other data given in the case. The bank can save
$10,000 salary (calculate below).With $40,000 depreciation expenses, the bank will be incurring
high expenses at lower customer traffic. Secondly, by declining the outsourcing service at
$480,000 it means that the bank is willing to pay salaries working at the service center a
minimum of $440,000.
This is a good price for they can assure you the quality of service you have. This means that they
won't have to pay for wages and salary of call center employees and its management, and
won't have to incur cost for their training and continuous supervision. As for the data provided,
outsourcing the call center service is the best option for the bank.

g) Suppose that the variable portion of servicing one retail customer is $4 (under the new
Activity-Based-Costing system). If the bank responds to the new customer profitability numbers
by letting one retail customer go, by how much would its total income for the year change?