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Each year, Knight Motors surveys former and prospective customers regarding satisfaction and brand awareness. For the current year, the company is considering outsourcing the survey
Each year, Knight Motors surveys former and prospective customers regarding satisfaction and brand awareness. For the current year, the company is considering outsourcing the survey to RBG Associates, who have offered to conduct the survey and summarize results. Craig Knight, the president of Knight Motors, believes that RBG will do a higher-quality job than his company has been doing, but is unwilling to spend more than $10,000 above the current costs. The following amounts for number of customers surveyed and the cost of the survey follow: | |||||||||
Annual number of customers surveyed | 7,600 | ||||||||
Cost of survey if conducted by RBG Associates | $ 35,000 | ||||||||
The head of bookkeeping for Knight has prepared the following summary of costs related to the survey in the prior year. | |||||||||
Mailing | $17,500 | ||||||||
Printing (done by Lester Print Shop) | 6,000 | ||||||||
Salary of Pat Fisher, part-time employee who stuffed envelopes | |||||||||
and summarized data when surveys were returned | 2,080 | ||||||||
Share of depreciation of computer and software used to track | |||||||||
survey responses and summarized results | 1,200 | ||||||||
Rent | |||||||||
Share of electricity/phone/etc. based on square feet of space | |||||||||
occupied by Pat Fisher vs. entire company | 600 | ||||||||
Total | $27,380 | ||||||||
Number of hours spent on survey by Pat Fisher | 130 | ||||||||
Required | |||||||||
What is the incremental cost of going outside versus conducting the survey as in the past? | |||||||||
Less cost savings: | |||||||||
Incremental cost of RGB providing the survey | |||||||||
Will Craig Knight accept the RBG offer? | |||||||||
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