$2025$SP$-$ACCT$-2302-82701-$Prin of Managerial Accounting

Homework: Chapter $10$ Understanding Assignment

Question

Part $1$ of $2$

Completed: $2$ of $5|$ My score: $1.$

Rita Riley manages a fleet of $275$ delivery trucks for Daniels Corporation.

View the additional information.

Riley performed the following analysis:

View the outsourcing decision analysis.

Read the requirements.

Requirement $1.$ Which alternative will maximize Daniels Corporation's short$-$term operating income?

In order to maximize short$-$term operating income, Daniels Corporation should because the variable cost of outsourcing to FMS results in

$|$ of

Additional Information

Riley 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 Riley to lay off five employees. However, her own job would be secure; she would be Daniels Corporation's liaison with FMS$.$ If she continues to manage the fleet, she will need fleet$-$management software that costs $\backslash (\backslash$$ $9,500\backslash )$ per year to lease. FMS offers to manage this fleet for an annual fee of $\backslash (\backslash$$ $285,000\backslash ).$

Requirements

$1.$ Which alternative will maximize Daniels Corporation's short$-$term operating income?

$2.$ What qualitative factors should Daniels Corporation consider before making a final decision?

Outsourcing Decision Analysis

$\backslash$begin$\{$tabular$\}\{|$l$|$l$|$l$|$l$|$l$|$l$|$l$|\}$

$\backslash$hline & $\backslash$multicolumn$\{3\}\{|$l$|\}\{$Retain In$-$House$\}$ & & $\backslash$multicolumn$\{2\}\{|$c$|\}\{$Difference$\}\backslash \backslash$

$\backslash$hline Annual leasing fee for software & $\backslash$$ & $9,500$ & & & $\backslash$$ & $9,500\backslash \backslash$

$\backslash$hline Annual maintenance of trucks & & $146,000$ & & & & $146,000\backslash \backslash$

$\backslash$hline Total annual salaries of five laid$-$off employees & & $185,000$ & & & & $185,000\backslash \backslash$

$\backslash$hline Fleet Management Service's annual fee & & & $\backslash$$ & $285,000$ & & $\backslash ((285,000)\backslash )\backslash \backslash$

$\backslash$hline Total differential cost of outsourcing & $\backslash$$ & $340,500$ & $\backslash$$ & $285,000$ & $\backslash$$ & $55,500\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}$