DE26-10 US. Surgical Corporation in Norwalk, Connecticut. manufactures and markets surgical equipment. Lilian Gonzalez manages the company's
Question:
DE26-10 US. Surgical Corporation in Norwalk, Connecticut. manufactures and markets surgical equipment. Lilian Gonzalez manages the company's fleet of 550 automobiles. Gonzalez has been charged with "reengineering" the fleet management function. She has an important decision to make. Should she continue to manage the fleet in-house with the five employees reporting to her? To do so, she will have to acquire new fleet management software to streamline U.S. Surgical's fleet management process. Should she outsource the fleet management function to Fleet Management Services, a company that specializes in managing fleets of automobiles for other companies? Fleet Management Services would take over the maintenance, repair, and scheduling of U.S. Surgical's fleet (but U.S. Surgical would retain ownership of its fleet). This alternative would require Gonzalez to lay off her five employees. However, her own job would be secure as she would be U.S. Surgical's liaison with Fleet Management Services. Assume that Gonzalez's records show the following data concerning U.S. Surgical's fleet: Book value of U.S. Surgical's autos, with an estimated 5-year life Annual leasing fee for new fleet management software. Annual maintenance of autos.... Fleet supervisor Gonzalez's annual salary. Total annual salaries of U.S. Surgical's five other fleet management employees....... $7.750.000 10.000 295.500 80.000 175,000 Suppose that Fleet Management Services offers to manage US. Surgical's fleet for an annual fee of $460,000. Which alternative will maximize U.S. Surgical's short-term operating income?
Step by Step Answer:
Accounting
ISBN: 9780130906991
5th Edition
Authors: Charles T. Horngren, Walter T. Harrison, Linda S. Bamber, Betsy Willis, Becky Jones