A service company is considering whether or not it should outsource its delivery services. The service company employs 400 workers at an average annual wage of $22,000 plus another 39% for fringe benefits. Annual fixed costs associated with delivery services are $1,500,000. A transportation company will provide similar services for a fixed annual cost of $7,500,000 plus a variable cost of $21,000 per employee required. The transportation company would need only 90% of the current employees at the service company. What are the annual costs of using its current staff at the service company and transportation company? What would your final decision be for the service company?
A service company is considering whether or not it should outsource its delivery services. The service company employs 400 workers at an average annual wage of $22,000 plus another 39% for fringe benefits. Annual fixed costs associated with delivery services are $1,500,000. A transportation company will provide similar services for a fixed annual cost of $7,500,000 plus a variable cost of $21,000 per employee required. The transportation company would need only 90% of the current employees at the service company. What are the annual costs of using its current staff at the service company and transportation company? What would your final decision be for the service company?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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