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What are the relevant costs involved in this decision

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Reference no: EM131915542

Problem - Cowboy Constructions employs a full-time driver and incurs costs for a vehicle to deliver paperwork between each of their building sites. Select Couriers has offered to carry out the work to the same standard of service for a fixed sum of £2,000 per month.

Cowboy's annual costs are currently:

Salary and on costs of driver £16,000

Salary and on costs of builder who covers for sickness and annual leave absences of driver £2,800

Depreciation of vehicle £2,500

Road tax, insurance & servicing £1,000

Fuel £3,000

Total £25,300

If Cowboy uses Select Couriers, it will sell the vehicle for £2,000, and the driver's employment will be terminated without any redundancy payment. The builder who covers for sickness and leave of the driver is currently replaced by casual labour which costs £3,500.

What are the relevant costs involved in this decision?

Should Cowboy sub-contract its delivery requirements to Select?

What considerations are there in making this decision?

Reference no: EM131915542

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