Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Required information [ The following information applies to the questions displayed below. ] Lightening Bulk Company is a moving company specializing in transporting large items
Required information
The following information applies to the questions displayed below.
Lightening Bulk Company is a moving company specializing in transporting large items worldwide. The firm has an
ontime delivery rate. Thirteen percent of the items are misplaced and the remaining are lost in shipping. On average,
the firm incurs an additional $ per item to track down and deliver misplaced items. Lost items cost the firm about $
per item. Last year, the firm shipped items with an average freight bill of $ per item shipped.
The firm's manager is considering investing in a new scheduling and tracking system costing $ per year. The new
system is expected to reduce misplaced items to and lost items to Furthermore, the firm expects total sales to
increase by with the improved service. The average contribution margin ratio on any increased sales volume, after
cost savings associated with a reduction in misplaced and lost items, is expected to be
Required:
a Based on a relevant cost analysis, should the firm install the new tracking system?
Yes
No
b What is the estimated change in pretax cash flow under the proposed system? Negative amounts should be indicated by a minus
sign. Round your answers to the nearest whole dollar amount.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started