Reference no: EM132973952
Question - Krista Waverly manages a fleet of 400 delivery trucks for Daniels Corporation. Waverly must decide whether the company should outsource the fleet management function. If she outsources to Fleet Management Services? (FMS), FMS will be responsible for maintenance and scheduling activities. This alternative would require Waverly to lay off her five employees.? However, her own job would be? secure; she would be Daniels?'s liaison with FMS. If she continues to manage the? fleet, she will need? fleet-management software that costs $9,500 per year to lease. FMS offers to manage this fleet for an annual fee of $375,000.
Waverly performed the following? analysis:
Annual leasing fee for software
Retain In-House 9,500
Difference 9,500
Annual maintenance of trucks
Retained In-House 145,000
Difference 145,000
Total annual salaries of five laid-off employees
Retained In-House 165,000
Difference 165,000
Fleet Management Service's annual fee
Outsource To FMS 375,000
Difference (375,000)
Total differential cost of outsourcing
Retained In-House 319,500
Outsource To FMS 375,000
Difference (375,000)
1. Which alternative will maximize Daniels?'s ?short-term operating? income?
2. What qualitative factors should Daniels consider before making a final? decision?