Priscilla Nailey manages a fleet of 375 delivery trucks for Jones 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 Jones’s liaison with FMS. If she continues to manage the fleet, she will need fleet- management software that costs $ 8,250 per year to lease. FMS offers to manage this fleet for an annual fee of $ 285,000. Nailey performed the following analysis:

Requirements
1. Which alternative will maximize Jones’s short- term operating income?
2. What qualitative factors should Jones consider before making a finaldecision?

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Retain Outsource To FMS Annual leasing fee for software Annual maintenance of trucks Total annual salaries of five laid-off employees Fleet Management Services annual fee Total differential cost of outsourcing In-House 8,250 147,000 175,000 Difference $ 8,250 147,000 175,000 (285,000) 5 42,250 $ 285,000 285,000 330,250