JKL Group has a rental cost of €25,000 per month with a four-year lease term. Casual staff are employed on a weekly basis to carry out telephone sales. The cost of casual staff is €12,000 per month and telephone call costs are €5,000 per month.
-An offshore call centre has offered to carry out the telephone sales activity from its own premises and using its own staff and telephone services for a fixed payment of €15,000 per month. The call centre's outsourcing proposal should be:
A) Accepted because the relevant cost is €15,000 compared to €17,000 for in-house telephone sales
B) Accepted because the relevant cost is €42,000 compared to €40,000 for in-house telephone sales
C) Rejected because the relevant cost is €45,000 compared to €42,000 for in-house telephone sales
D) Rejected because the relevant cost is €17,000 compared to €15,000 for in-house telephone sales

Question

Quizplus · Accepted Answer

The relevant costs for in-house telephone sales are the cost of casual staff (€12,000 per month) and telephone call costs (€5,000 per month), totaling €17,000 per month. The offshore call centre's offer is €15,000 per month, which is lower than the in-house cost of €17,000. Therefore, the proposal should be accepted based on relevant costs.

JKL Group Has a Rental Cost of €25,000 Per Month