Question: Ellis seafood is determining which distribution option it should use next year for delivery to its commercial clients. They have an option to lease their
Ellis seafood is determining which distribution option it should use next year for delivery to its commercial clients. They have an option to lease their own truck at a fixed cost of $21K per year (includes lease, insurance, and maintenance). Variable costs per delivery would be $50 per order. Currently, they are using a common carrier to deliver their orders in town. The costs to maintain the contract are estimated to be $2000 (vendor qualification / quality assurance) but the variable cost per shipment is $300.
What is the indifference point between these two options?
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