Finsburry Logistics Inc. can render three different types of services: Standard Delivery, Special… 1 answer below »
Finsburry Logistics Inc. can render three different types of services: Standard Delivery, Special Delivery & Urgent Delivery using the same staff.
Various estimates for next year have been made as follows:
Service Standard Special Urgent
Delivery Delivery Delivery
(£ per unit) (£ per unit) (£ per unit)
Selling Price 30 39 20
Variable material costs 15 18 10
Other variable costs 6 10 5
Share of fixed costs 8 12 4
Staff time required (hours) 2 3 1
Note: The fixed costs for the next year are expected to be £40,000 in total.
Requirements (consider all the requirements as separate and independent of each other):
(a) If Finsburry were to provide only the Standard Delivery service next year, how many units of the Standard Deliveries would it need to provide in order to break even?
(b) If Finsburry has a maximum of 10,000 staff hours next year, in which order of preference would you recommend the three services come?
(c) If the maximum market for next year for the three services is as follows:
Standard Delivery: 3,000 units
Special Delivery: 2,000 units
Urgent Delivery: 5,000 units
what quantities of which service should the business provide next year and how much profit would this be expected to yield?