Question

Each year, Knight Motors surveys 7,600 former and prospective customers regarding satisfaction and brand awareness. For the current year, the company is considering outsourcing the survey to RBC Associates, which has offered to conduct the survey and summarize results for $35,000. Craig Knight, the president of Knight Motors, believes that RBG will do a higher-quality job than his company has been doing but is unwilling to spend more than $10,000 above current costs. The head of bolos keeping for Knight has prepared the following summary of costs related to the survey in the prior year.
Mailing.................... $17,000
Printing (done by Lester Print Shop)........ 6,500
Salary of Pat Fisher, part-time employee
who stuffed envelopes and summarized
data when surveys were returned
(130 hours X $16).................. 2,080
Share of depreciation of computer and
software used to track survey responses
and summarize results............... 1,200
Share of electricity/phone/etc. based on
square feet of space occupied by Pat
Fisher vs. entire company............. 600
Total...................... $27380

Required
What is the incremental cost of going outside vs. conducting the survey as in the past? Will Craig
Knight accepts the RBG offer?



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  • CreatedSeptember 23, 2013
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