ACCT 101 Decision to outsource ACCT 101 Decision to outsource

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Decision to outsource

Mary Tan is the controller for Duck Associates, a property management company in Portland,
Oregon. Each year, Tan and payroll clerk Toby Stock meet with the external auditors about
payroll accounting. This year, the auditors suggest that Tan consider outsourcing Duck
Associates’ payroll accounting to a company specializing in payroll processing services. This
would allow Tan and her staff to focus on their primary responsibility: accounting for the
properties under management. At present, payroll requires 1.5 employee positions—payroll clerk
Toby Stock and a bookkeeper who spends half her time entering payroll data in the system.

Tan considers this suggestion, and she lists the following items relating to outsourcing payroll
accounting:
a. The current payroll software that was purchased for $4,000 three years ago would not be
needed if payroll processing were outsourced.
b. Duck Associates’ bookkeeper would spend half her time preparing the weekly payroll input
form that is given to the payroll processing service. She is paid $450 per week.
c. Duck Associates would no longer need payroll clerk Toby Stock, whose annual salary is
$42,000.
d. The payroll processing service would charge $2,000 per month.