Cost Analysis Case: Revenue Reduction Solutions for Friendly Courier

This case study analyzes the costing problems faced by Joe Saberian's business, particularly focusing on the revenue reduction and increased costs associated with delivery trucks. The primary issues identified are breakdown repair costs and suspension repair costs, influenced by factors such as driver skills, road conditions, and the age of the vehicles. The analysis suggests that replacing the aging fleet of delivery trucks would be a more effective long-term solution than continuing with costly repairs or opting for a lifetime warranty. Replacing the old trucks will reduce operational costs, improve business efficiency, and generate revenue through the sale of the old vehicles. The study concludes that investing in new trucks is the optimal strategy for Joe to lower business costs and enhance revenue, rather than persisting with the existing high-maintenance fleet.

Business costing
Costing and analysis
[DATE]
[Company name]
[Company address]

Introduction
This case has been prepared to determine the costing problems and possible resort
which could be used to lower down the business costing in the process. This case focuses on
the reasons and issues behind the revenue reduction and prefect solutions to strengthen the
business efficiency. In this case, several issues and possible resort have been identified which
have been revealed to lower down the travel costing and strengthen the possible business
outcomes. This report has divulged the possible issues and increased breakdown cost of the
delivery trucks which may result to increased business costing. These Trucks have been used
for delivery to businesses in East and West parts of Toronto and driven by two crews commonly
referred to as “west team and “east Team”.
In the given case Joe saberian wants to know the reason behind the revenue reduction (10%)
and want a perfect solution to reduce the losses. After assessing the case and details given in
the case study of the delivery trucks costing and possible job costing reduction process of the
Joe Saberian business following two factors are identified. Therefore following two factor
should be consider:-
1. Breaks down repair cost- This is the business costing which arise due to the breakdown of
the machines and delivery trucks of the business. This is constantly happening and increasing
the business costing. This is the major factor behind increased business costing.
2. Suspension repair cost- This is the cost required to be incurred which may result to
increased business handling. It may include repair costing and other expenses incurred for
handling the delivery trucks and other machines in organization (Elhamma, & Zhang, 2013).
These two costs and other related costing will be affected by different element which may
result to increased business costing. If these costing could be avoided then Joe could lower
down the business costing in effective manner (Askarany, & Smith, 2013).
After assessing the case study, it could be inferred that while a Vehicle is running on road
there may be several thing which might be responsible for break down such as brake pads
callipers and drums. In addition to this, it might be the issue or it may be problem with the
master cylinder. This is the major part of increased business costing. Breakdown repair cost
impacts with Driver skills and road condition like Delivery trucks driver drive so roughly.
Nonetheless, these all costing are interrelated but may be destructed due to the loss of the
breakdown of the delivery trucks on road (Lund, 2017).

Breakdown repair cost effects with Driver skills and road condition like Delivery trucks
driver drive so roughly. This could be controlled only when the new drivers are located with
the delivery trucks in the process. It may also increase the initial costing and would also
increase the overall costing of the business in the initial period (Huang, et al. 2014).
However, after assessing the case and based on the factors shared in this case, it is found that
it involves the low amount of brake fluid in the master cylinder which causes the break
failure.
Break uses the friction to stop the delivery trucks due to which break pads need to be
replaced after a fix period if it does not get replaced timely then there might be a situation to
replace worn pads or Drums which will result in higher cost. Therefore, brake pads need to be
replaced after a fix period in delivery trucks so that Friendly Couriers Incorporation could
possibly avoid the possible costing (Hilton,. & Platt, 2013).
However, in this case, it is found that if we notice the balding spot on tires that’s mean it will
put uneven amount of pressure on the tires and soon we will need to replace vehicles tire. The
uncertain failure in tire may lead to the accidents and other events which may result to higher
level of loss to organization. Therefore, pre-active steps needed to be adopted to possibly
avoid the possible costing (Innes, Mitchell, & Sinclair, 2010).
It is analysed that switching the team with the delivery trucks would not be a great idea
because the delivery trucks driver skills and road condition will still the same which will not
make any sense for cost reduction purpose (Hernandez, & Hernandez, 2018). Therefore, if Joe
is thinking of changing the delivery trucks drivers and firing the rush drivers to avoid the
possible accidents then it might lower down the cases to the certain but will not be the best
resource in this situation (Kaplan, & Anderson, 2007).
Mileage travelled will definitely impact both kind of cost but it will have its impact more
while reducing the break down costing of the delivery trucks. As this Mileage travelled will
still remain the same for both west and east team so it would be recommended to replace the
existing driver with higher skill delivery trucks driver for delivery services. This case shown
the cases where Joe could reduce the lower down the costing. Mike has also found that this
break down in the delivery cost has highly resulted to the increased operational cost and if
continues to happen then it may result to destruction of the business in long run (Schmidt,
2013).
In this case, it is found that as these all delivery trucks have been used in the delivery service
from the last 8 years due to which they have been depreciating since longer time. This kind of

vehicle require continues maintenance to keep them running on road which will resulting in
higher cost (Huang, et al. 2012).
It is found that dispatcher has also introduced a proposal of free life time warranty for repair
work on annual expenditure of $4500 where Owner of the delivery trucks will not require to
spend further more expenditure on old delivery trucks. However, it will save owners from
the possible business losses on the delivery trucks but also keep them save from the uncertain
losses. This average mileage travelled cost surely has high negative impact on the business
and also lower down the business efficiency (Liberatore, Miller, & Liberatore, 2016).
However, it might look that after assessing the case and the given table of expenditure, there
would be lower expenditure as compare to the warranty proposal then why should we opt for
annual warranty contract, to understand the reason behind this we should keep in the mind
that these delivery trucks are older and running for last 8 years. These delivery trucks needs
be replaced which will strengthen the business efficiency and lower down the delivery trucks
costing on consistent basis. This delivery trucks have obsolete part and engine can also be
broken down any time which can causes higher loss to the owner.
Recommendation
After assessing the case, it could be inferred that Joe should focus on replacing the old trucks
with the new delivery trucks. This will requires initial costing from his business. However,
the main benefit from this case would be related to inflow of selling the old delivery trucks in
market. This will lower down the overall costing of the new delivery trucks costing. It is
genuine that if new trucks are purchased by the Joe for Friendly new business then it will
surely lower down the packing and delivery business costing. So this is how Joe saberian can

reduce the operational cost related to Repair of delivery trucks and can increase the revenue if
he follows the possible resort which is given above. The main suggestion is that Joe should
not continue with the existing old delivery trucks due to its high costing and break down
expense (Baxendale, 2011).
Conclusion
There are several options which could be taken by Joe to lower down the business
costing. The best option is to replace the old trucks with the newly instead of taking the
insurance. Therefore, there is one option for the Joe to lower down its business costing that is
related to taking insurance or buying new delivery trucks. However, the best option is getting
indulged in investing more capital in buying new delivery trucks and selling old delivery
trucks. The cash inflow from the old delivery trucks could be used by Joe to buy new delivery
trucks which could lower down the costing of these new delivery trucks and also lower down
the cost of capital.

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