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Cowboy Constructions employs a full-time driver

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Question;1.2 Cowboy Constructions employs a full-time driver and incurs costs for a vehicle to deliver paperwork between each of their building sites. Select Couriers has offered to carry out the work to the same standard of service for a fixed sum of ?2,000 per month. Cowboy?s annual costs are currently:Salary and oncosts of driver ?16,000Salary and oncosts of builder whocovers for sickness and annual leaveabsences of driver ?2,800Depreciation of vehicle ?2,500Road tax, insurance & servicing ?1,000Fuel ?3,000Total ?25,300If Cowboy uses Select Couriers, it will sell the vehicle for ?2,000, and the driver?s employment will be terminated without any redundancy payment. The builder who covers for sickness and leave of the driver is currently replaced by casual labour which costs ?3,500.What are the relevant costs involved in this decision?Should Cowboy sub-contract its delivery requirements to Select?What considerations are there in making this decision?

 

Paper#45003 | Written in 18-Jul-2015

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