Colombe-Déménagements SA is a removals company that transports household goods from one Belgian city to another. It measures service quality in terms of
(a) Time required to transport goods,
(b) On-time delivery (within two days of agreed-upon delivery date) and
(c) Lost or damaged shipments. Colombe-Déménagements is considering investing in a new scheduling and tracking system costing €160 000 per year that should help it improve performance with respect to items (b) and (c). The following information describes Colombe-Déménagements’ current performance and the expected performance if the new system is implemented:
Colombe-Déménagements expects that each percentage point increase in on-time performance will result in sales increases of €20 000 per year. Colombe-Déménagements’ contribution margin percentage is 45%.
1. What are the annual additional costs to Colombe-Déménagements of choosing the new scheduling and tracking system?
2. What are the annual additional benefits of the new system?
3. Should Colombe-Déménagements acquire the new system?