Reference no: EM133169907

Question - A special contract had been offered to the company to serve as a special project to help the small oil palm farmers to buy their fruit bunch as they were complaining of malpractice by the middlemen that currently purchased their fruit. The proposal is to set a mobile buyers containers truck to be stationed near the small farmers area to buy all the fruit bunch from them. This may be seen as a direct rival to the current buyers. The cost of each set of containers truck and weighing equipment is RM 200,000 and can be safely used for 5 years. The operating costs of running these containers truck is RM 50,000 per month. The office and corporate overheads on the project is estimated to be RM 30,000 a month. The expected purchased volume is about RM 30,000 a day with an internal profit margin of 8%. The fruit bunch truck will operate 30 days a month. The group propose to start with 20 trucks as a pilot project. The office and corporate overheads on the project is estimated to be RM 30.000 a month. The expected purchased volume is about RM 30,000 a day with an internal profit margin of 8%. The fruit bunch truck will operate 30 days a month. The group propose to start with 20 trucks as a pilot project.

Required -

a) Should the group venture into this project? Show your calculation.

b) What are the qualitative considerations that must be taken into account in the decision?