Question

Wheeler Food in Atlanta, Georgia, manufactures and markets snack foods. Gita Lee manages the company's fleet of 220 delivery trucks. Lee has been charged with "reengineering" the fleet-management function. She has an important decision to make. (Click the icon to view the decision Lee has to make.) Assume that Lee's records show the following data concerning Wheeler Food's fleet: (Click the icon to view the data.) Suppose that Fleet Management Services offers to manage Wheeler Food's fleet for an annual fee of $276,000. Which alternative will maximize Wheeler 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.) Wheeler Food Outsourcing Decision Analysis Retain Outsource to FMS In-House Difference Total cost of fleet

Answer 1

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		Retained in House	Outsource	Difference
Annual Leasing fee for software		$                                 8,200		$             8,200
Annual maintenance of trucks		$                            166,000		$        166,000
Annual salaries of other five		$                            130,000		$        130,000
Fleet Management fee annual			$       276,000	$      (276,000)
				$           28,200
Operating income will increase by $28,2000 by outsourcing hence it should be outsourced