Should she continue to manage the fleet in-house with the five employees reporti

Question

Should she continue to manage the fleet in-house with the five employees reporting to her? To do so, she will have to acquire new fleet-management software to streamline Greely Food's fleet-management process hoe the gio to Feet Maement Service,a company that specializes in managing fleets of trucks for other companies? Fleet Management Services would take over the maintenance, repair, and scheduling of Greely Food's fleet (but Greely Food would retain ownership). This alternative would require Casey to lay off her five employees. However, her own job would be secure, as she would be Greely Food's liaison with Fleet Management Services.

Explanation / Answer

Part-1

Book value of Greely Trucks $3,900,000 is a sunk cost and irrelavant in either cases in decision making. Cost of Fleet supervisor Casey's Annual salary of $64,000 will be incurred in both cases.

Answer: By choosing outsourcing to FMS cost of fleet will decrease by $35,400 as shown above working. So Operating income for Greely Food will increase by $35,400.

Greely Food Outsourcing Decision Analysis Retain In-house $ Outsource to FMS $ Difference $ Annual Leasing Fees for software            (8,400)                     -               (8,400) Annual Maintanance of trucks       (162,000)                     -          (162,000) Annual salaries of five fleet management employees       (135,000)        (135,000) Fleet supervisor Casey's Annual salary          (64,000)          (64,000)                      -   Fleet management services annual fees                     -         (270,000)          270,000 Total cost of fleet       (369,400)       (334,000)          (35,400)

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.