Question

Mealy Food in Salt Lake City, Utah, manufactures and markets snack foods. Tessa Bailey manages the company's fleet of 190 delivery trucks. Bailey has been charged with reengineering the feel-management function. She has an important decision to make Click the icon to view the decision Bailey has to make.) Assume that Bailey's records show the following data concerning Mealy Food's fleet: Click the icon to view the data) Suppose that Fleet Management Services offers to manage Mealy Food's feet for an annual fee of $270,000. Which alternative will maximize Menly Food's short-term operating income? Complete the following analysis. (Enter a "0" for any zero amounts. Use a minus sign or parentheses for subtracting numbers that are typically shown enclosed in parentheses in an Outsourcing decision.) Mealy Food Outsourcing Decision Analysis Rotain In-House Outsource to FMS Difference

Answer 1

Mealy Food
Outsourcing Decision Analysis
	Retain in-House	Outsource to FMS	Difference
Annual maintenance of trucks	152000	0	-152000
Annual salaries of five fleet management employees	155000	0	-155000
Annual leasing fee for software	8000	0	-8000
Fleet Supervisor Bailey's annual salary	55000	55000	0
Fleet Management Services' annual fee	0	276000	276000
Total cost of fleet $	370000	331000	-39000

Operating income for Mealy Food will increase by $39000 if it outsources the fleet management function.