Reference no: EM132524030

John is trying to decide whether to outsource its Alpha department. Currently the department occupies $250000 of office space (in terms of annual cost) and spends $500000 on other overhead each year. The office space will need to be paid for even if the in-house customer service department is closed. That space can be reassigned to another department. The extra space will help that department operate more efficiently, saving $40000 in annual costs. Aside from the office space, none of the other overhead of the customer service department is sunk. The customer service department also needs an average of 15 minutes of labor to handle each service call, with direct labor costing $11 per hour. An outside call center is willing to handle your customer service business at a price of $6.75 per service call. You expect to receive 150000 service calls next year.

Question 1: How much would outsourcing customer service increase profit? (Negative value for decrease in profit, give amount as a whole number.)