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Costing Outsourcing

2(a) Refer to Table 2. Calculate the difference between the annual cost of outsourcing the transport of fuel in country X with the existing annual cost of transport. (8 marks)
Summer 2018 Paper 31

Current Cost($)____________________________________________Outsourcing Cost($)
Variable Cost__________600m x 0.1 = 60m____________________600m x 0.13 = 78m
Fixed Cost________________________ 20m
Depreciation________________________5m
Allocated Head Office Cost___________4m
Total_______________________________89m

Cost saving = 89m - 78m = $11 million