What are the annual additional benefits of the new system

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Reference no: EM13936990

Quality improvement, relevant costs and revenues, service.

Colombe-Déménagements SA is a removals company that transports household goods from one Belgian city to another. It measures service quality in terms of (a) time required to transport goods, (b) on-time delivery (within two days of agreed-upon delivery date) and (c) lost or damaged shipments. Colombe-Déménagements is considering investing in a new scheduling and tracking system costing €160 000 per year that should help it improve performance with respect to items (b) and (c). The following information describes Colombe-Déménagements' current performance and the expected performance if the new system is implemented:

 

Currentperformance

Future expected performance

On-time delivery performance

85%

95%

Variable costs per carton lost or damaged

€60

€60

Number of cartons lost or damaged per year

3000 cartons

1000 cartons

Colombe-Déménagements expects that each percentage point increase in on-time perform- ance will result in sales increases of €20 000 per year. Colombe-Déménagements' contribution margin percentage is  45%.

Required

1. What are the annual additional costs to Colombe-Déménagements of choosing the new scheduling and tracking system?

2. What are the annual additional benefits of the new system?

3. Should Colombe-Déménagements acquire the new system?

Reference no: EM13936990

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