Determine the relevant costs, Cost Accounting

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                 £16,000
covers for sickness and annual leave
absences of driver                               £2,800
Depreciation of vehicle                         £2,500
Road tax, insurance & servicing             £1,000
Fuel                                                    £3,000
Total                                                   £25,300


If 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?

Posted Date: 2/18/2013 8:21:32 AM | Location : United States





I need homework help, please.
Posted by Shan | Posted Date: 7/7/2013 4:53:58 PM


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