6. NXU Transport pic comprises three divisions - Buses, Taxis, and Maintenance. Buses division operates a fleet of eight vehicles on four different routes in M town. Each vehicle has a capacity of 30 passengers. There are two vehicles assigned to each route. and each vehicle completes five return journeys per day, for six days each week, for 52 weeks per year. Buses division is considering its plans for year ending 31 December. Data in respect of each route is as follows: Route Route Route Route A B D 42 36 44 38 Distance per retum journey (miles) Average number of passengers: Adults Children Return journey fares: Adults Children 15 10 10 8 25 5 The following cost estimates have been made: Fuel and repairs per miles Drivers' wages per vehicle per work-day Vehicle fixed cost per annum General fixed cost per annum 3.00 6.00 4.50 2.20 1.50 3.00 2.25 1.10 20 10 0.1875 120 2,000 300,000 Required: (a) Prepare a statement showing the planned contribution of each route, the total contribution of each route and the total contribution and profit of the Buses division for the year ending 31 December. (10 marks) (b) The Maintenance division comprises two fitters who are each paid an annual salary of 15,808, and a transport supervisor who is paid an annual salary of 24,000. The Page 8 of 15 work of the Maintenance division is to repair and service the buses of the Buses division and the taxis of the Taxis division. In total there are eight buses and six taxis which need to be maintained. Each vehicle requires routine servicing on a regular basis on completion of 4000 miles: every two months each vehicle is fully tested for safety. The Maintenance division is also responsible for carrying out any breakdown work, though the amount of regular servicing is only 10% of the Maintenance division's work. The annual distance travelled by each taxi is 128,000 miles. The projected material costs associated with each service and safety check are 100 and 75 respectively, and the directors of NXU Transport Group plc are concerned over the efficiency and cost of its own Maintenance division. The company invited its local garage to tender for the maintenance contract for its fleet and the quotation received was for 90,000 per annum including parts and labour. If the maintenance contract is awarded to the local garage then the Maintenance division will be closed down, and the two fitters made redundant with a redundancy payment being made of 6 months' salary to each fitter. The transport supervisor will be retained at the same salary and will be redeployed elsewhere in the Group instead of recruiting a new employee at an annual salary cost of 20,000. Required to: () Evaluate the cost of existing maintenance function and advise the directors of NXU Transport Group plc whether or not to award the maintenance contract to the local garage on financial grounds. (10 marks) (ii) State clearly the other factors which need to be considered before making such a decision, commenting on any other solutions which you consider to be appropriate.