Nakheel Sports Inc manufactures shoes and athletic clothing for both amateur and professional athletes. The company has two product lines (clothing and shoes), which are produced in separate manufacturing facilities. However, both manufacturing facilities share the same support services for information technology and human resources. The following shows total costs for each manufacturing facility and for each support department.
|
|
Total Costs by Department (in thousands)
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Information Technology (IT)
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$2000
|
|
Human Resource (HR)
|
$1000
|
|
Clothing
|
$10000
|
|
Shoes
|
$8000
|
|
Total Costs
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$21000
|
The total costs of the support departments (IT and HR) are allocated to the production departments (clothing and shoes) using a single rate based on the following:
Information Technology : Number of IT labor hours worked by department.
Human Resources : Number of employees supported by department
Data on the bases, by department, are given as follows:
|
Department
|
IT Hours Used
|
Number of Employees
|
|
Clothing
|
5,000
|
120
|
|
Shoes
|
3000
|
40
|
|
Information Technology
|
-
|
40
|
|
Human Resources
|
2000
|
-
|
Required:
Assume that all the work on the IT department could be outsourced to an independent company for $97.50 per hour. If Nakheel Sports no longer operated its own IT department, 30% of the fixed costs of the IT department could be eliminated. Should Nakheel Sports outsource its IT services?
Please give a detailed answer ( how to find fixed and variable costs from the Q )
Please I want a detailed answer ( how to find the variable and fixed costs from the given q( in detailed ))