Evaluate whether leasing vans from a different supplier

Assignment Help Management Theories

Reference no: EM133425066

Case Study: Netherwell Parcels Itd Seeking to capitalise on the continued growth of E-retailing, Jeremy and Mark had set up Netherwell Parcels in 2008. Operating initially as a partnership, Netherwell Parcels was originally a Yorkshire based venture. Despite the very competitive nature of the market, they enjoyed pleasing levels of business success. After becoming a limited company and raising funds from selling shares, the business is about to go national, delivering parcels to anywhere on the British mainland. Jeremy, who largely covers the marketing side of the firm, securing new business contracts etc., has calculated the break-even point for the expansion. In a business meeting he explained to Mark and the other shareholders that the total fixed costs, including leasing the vans etc. would be 190,000 per year, based on a quote from their current van provider who they have used since the business first began. The price customers paid to send a parcel depended on size, weight and distance with some customers paying hundreds of pounds to ship particularly heavy and bulky items, though this was unusual. The starting price for sending a parcel was $3.60 and this is the price Jeremy used. Variable costs were largely comprised of wages and fuel. Jeremy used last year's petrol prices to base his calculations on, arriving to the conclusion of f1.25 variable costs per parcel. Jeremy explained that the business would need to ship just under 38,300 parcels to break even. Mark said this figure worried him as it was higher than he had expected and he was not sure the calculation was correct. Other shareholders also expressed concern. Upon reviewing the figures, a member of the board said she felt the vans could be leased for f20,000 less per year by using another company she knew of and this would be the best way to reduce the break-even point.

Exam-style questions

1. Assess two reasons why the break-even figure given to Mark could be unreliable

2. Evaluate whether leasing vans from a different supplier would be the best way to lower the break-even point?

Reference no: EM133425066

Questions Cloud

Program change for treatment of chronic conditions : How does an organization's culture need to change to ensure the sustainability of the program change for treatment of chronic conditions?

Processes and process thinking-inputs and outputs-flows : Pick a topic: Processes and process thinking, inputs/outputs/flows, capacity planning, economies and diseconomies of scale,

Does the sequence of thyssenkrupp strategy : Does the sequence of ThyssenKrupp's strategy of international expansion follow the theoretical concept of psychic distance?

Explain product life-cycle reverse logistics support policy : Explain product life-cycle reverse logistics support policy of a company for reclaiming value from recalled or returned or recycled or waste materials.

Evaluate whether leasing vans from a different supplier : Assess two reasons why the break-even figure given to Mark could be unreliable Evaluate whether leasing vans from a different supplier would be the best way

Change plan of treatment of chronic conditions : Identify communication strategies to internal and external stakeholders to facilitate a change plan of treatment of chronic conditions.

Does a desperate seller fit definition of a willing seller : Does a desperate seller fit the definition of a willing seller? o Discuss the three approaches to valuation. Why must an analyst include all three approaches

Describe employee roles and specific qualifications : Describe the employee roles and the specific qualifications they need to fulfill the positions' responsibilities.

Negative effect on integrity of the database : Can a database contain two identical records without a negative effect on the integrity of the database? Why or why not?

User Account

All Pages