Priscilla Nailey manages a fleet of 375 delivery trucks for Jones Corporation. Nailey must decide if 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 a 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?

Transcribed Image Text:

JONES CORPORATION Outsourcing Decision Analysis Retain Outsource In-House to FMS Difference Annual leasing fee for software 8,250 S 8,250 Annual maintenance of trucks 147,000 147,000 Total annual salaries of five other fleet management employees 175,000 175,000 Fleet Management Services' annual fee 285,000 (285,000) Total cost / cost savings 330,250 $ 285,000 $ 45,250