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Sea Transport - communicate the costs of your department

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As the manager of inland department for Sea Transport, a large international transport company in Baltimore, you are responsible for providing door delivery service to your customers with your own trucks within the U.S, which includes a pick-up from the port, and delivery to the customer's address. But of course, operating with your own trucks are costly, and these costs can be summarized as; maintenance of the trucks, salaries of the drivers, fuel costs etc...

Early in January, you received a memo from the president of Sea Transport requesting information about the cost of operating your department for the last 12 months. He has received a bid from Happy Trucking , Ins., to perform all inland activities you now perform. You are to prepare a cost report that will help him to decide whether to keep the department within the company or to outsurce the work.

1- Before preparing your report, answer the following questions:

a.What kinds of information do you need about your department ?
b.Why is this information relevant ?
c.Where would you go to obtain this information ( sources)?
d.When would you want to obtain this information ?

2- Draft a report showing only headings and line items that best communicate the costs of your department. Then classify your cost accounts. After that, how would you change your report if the president asked you to reduce costs of operating your department ?

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Solution Summary

Your response is 214 words plus a management report for the trucking department.

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a.What kinds of information do you need about your department ?

Need fixed versus variable costs so that you can see what costs will go away if you outsource the work. Also, you need to know any fixed costs that will be eliminated if the work is outsourced. You do not need details on common or allocated costs that are shared with other parts of the business and so are not going away.

b.Why is this information relevant ?

If you outsource, you should only ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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