Question

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Good Snack manufactures and markets snack foods. Rita Casey manages the company's fleet of 320 delivery trucks. Casey has been charged with "reengineering" the fleet-management function. She has an important decision to make. (Click the icon to view the decision Casey has to make.) Assume that Casey's records show the following data concerning Good Snack's fleet: E (Click the icon to view the data.) Suppose that Fleet Management Services offers to manage Good Snack's fleet for an annual fee of $300,000. Which alternative will maximize Good Snack's short-term operating income? Complete the following analysis. (Leave any unused cells blank. Use a minus sign or parentheses for subtracting numbers that are typically shown enclosed in parentheses in an outsourcing decision.) Good Snack Outsourcing Decision Analysis More Info x Retain Outsource In-House to FMS Difference . 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 Good Snack's fleet-management process. . Should she outsource the fleet-management function to Fleet Management Services, a company that specializes in managing fleets of trucks for other companies? Fleet Management Services would take over the maintenance, repair, and scheduling of Good Snack's fleet (but Good Snack would retain ownership). This alternative would require Total cost of fleet Casey to lay off her five employees. However, her own job would be secure, as she would be Good Snack's liaison with Fleet Management Services Operating income for Good Snack will by sby outsourcing the fleet-management function. Done Choose from any list or enter any number in the input fields and then continue to the next question. Print

Answer 1

Solution

Good Snack
Outsourcing Decision Analysis
	Retain In House	Outsource to FMS	Difference
Annual Fee		300,000
Annual Maintenance of Truck	151,500
Supervisory's Annual Salary	62,000
Total annual salary of Good Snack 5 other fleet employees	190,000
less : Benefit achieved	-8,400
Total	395,100	300,000	95,100
Thus , for Good Snack decision to Outsource To FMS is better as it is giving them profit by $ 95,100

Note** Book Value of truck is not considered because that is a fixed expenses which will incurred every year.