Delila Nailey manages a fleet of 325 delivery trucks for Yankee Corporation. Nailey 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 Nailey to lay off her five employees. However, her own job would be secure; she would be Yankee€™s liaison with FMS. If she continues to manage the fleet, she will need fleet- management software that costs $10,000 per year to lease. FMS offers to manage this fleet for an annual fee of $265,000. Nailey performed the following analysis:

Requirements
1. Which alternative will maximize Yankee€™s short-term operating income?
2. What qualitative factors should Yankee consider before making a final decision?

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Retain In-House S 10,000 145,000 160,000 Outsource to FMS Annual leasing fee for software Annual maintenance of trucks Total annual salaries of five laid-off employees Fleet Management Service's annual fee Total differential cost of outsourcing Difference S 10,000 145,000 160,000 (265,000) S 50,000 $ 265,000 315,000 265,000