Problem 1 The Fancy Stuff, Inc. furniture store has been in business for two years. Currently, they retain their own delivery department, which has a small feet of trucks and was designed to handle substantially more deliveries than the company currently requires. In the future, the company is anticipating increases in sales activity and therefore, increased deliveries. Their on-site delivery department can handle about 3,000 deliveries without additional employees or equipment Now, Fancy Stuff is evaluating a proposal from We-Carry, Inc., an unrelated delivery company, to handle all their delivery requirements. We-Carry would charge a fee of $30 per delivery Following is Fancy Stuff's delivery cost for the past two years Year 1 Year 2 Number of deliveries Cost of operating the delivery department Average cost per delivery 600 25,480 $42.47 700 480 $37.82 Given the average cost per delivery shown in the schedule, the store manager recommends accepting the We- Carry, Inc. $30 delivery proposal and eliminating Fancy Stuffs in-house delivery department. Estimated deliveries for the next two years are: Year 3 1,250 deliveries and Year 4 1,775 deliveries Required: a. Using the high-low method and their delivery and cost information for years 1 and 2, determine the b. Based on your analysis in part a., should the store manager eliminate the company's delivery c. Based on your computations in part a, for years 3 and 4, compare the predicted cost of in-house d. Determine the number of deliveries at which the store manager would be indifferent as to the e. Explain to the store manager why using average cost is not the appropriate metric for comparing fixed and variable components of the company's delivery cost. department and accept the outside delivery service of $30 per delivery delivery to the cost they would incur from the proposed outside delivery service method of delivery, i.e. in-house v. the outside delivery service the in-house delivery cost to the outsourced delivery cost