Michael Hedrick
Bus 630 Managerial Accounting
Sept. 3rd, 2012
Anton Narinskiy
1) What is FedEx 's strategy for success in the marketplace? Does the company rely primarily on a customer intimacy, operations excellence, or product leadership customer value proposition? What evidence supports your conclusion? FedEx 's strategy for success relies on a combination of all three customer value propositions. It does stress operational excellence higher than the other two though. On page 4 of the 10-K, FedEx 's strategy is to leverage and extend one of our greatest assets, the FedEx brand, and to provide our customers with convenient, seamless access to our entire portfolio of integrated business solutions (FedEx form 10-K, …show more content…
Two examples of traceable fixed costs for FedEx Express would be the 673 facilities in operation in the United States and 226 city stations throughout FedEx Express 's international network. Also its aircraft, sorting facilities, and administration buildings. Examples of traceable fixed costs for FedEx Ground are the salary paid to its executive officers and its distribution system consisting of 515 facilities and 28 hubs in the U.S. and Canada. FedEx 's Freight traceable fixed costs are the operation of approximately 39,500 vehicles and trailers from a network of 321 service centers. Also the salary of Douglas G. Duncan, its President and Chief Executive Officer. Two examples for FedEx Kinko 's would be the operation of its 1,290 Office and Print centers and how much it is to rent those centers. Common Costs that are not traceable are assigned on an arbitrary basis, because there is no logical criteria for its assignment to any specific function or product. Examples of that for FedEx are the costs that pertain to running an athletic event. Another example would be the CEO 's salary, as it is not traceable to any specific segment within the business. The business could not eliminate the CEO 's salary by eliminating a specific segment (Bragg, …show more content…
Compute the residual income earned in 2005 in each of FedEx 's four segments. The definition of residual income is the net operating income that an investment center earns above the minimum required return on its operating assets (Noreen, 2012).
FedEx Express: Average Operating Assets - $13,130 Net Operating Income - $1,414 Minimum Return (15% x $13,130) = $1969.50 $1,414 - $1969.50 = ($555.50)
FedEx Ground: Average Operating Assets - $2,776 Net Operating Income -