Question

Which of the following customers should ABC Truckline serve and why should they choose that customer to serve based on the relevant facts below? Please include a breakdown of your thoughts for reference.

ABC Truckline is trying to determine which of two customers to serve, based on average profitability. The relevant facts are as follows:

Customer 1 is picked up on Mondays. The pickup is part of a route that averages 23 stops, covers 60 miles during the route, and generally requires 11 hours of driver labor. The average shipment from Customer 1 is 600 pounds and 240 cubic feet. Linehaul trailer capacity is 40000 pounds and 2880 cubic feet, and the destination 200 miles away. Delivery for Customer 1 involves a route that covers 16 stops, 45 miles, and takes 10.5 hours of driving. ABC charges Customer 1 $5.25 per hundred pounds. Handling at origin and destination is 15 minutes at each end.

Customer 2 is picked up on Wednesdays. The pickup is part of a route that averages 13 stops, covers 50 miles, and requires 9.5 hours of driver time. The average shipment from Customer 2 is 9000 pounds and 1800 cubic feet. Linehaul trailer capacity is 42000 pounds and 3000 cubic feet, and the destination is 750 miles away. Delivery for Customer 2 involves a route that covers 9 stops, 85 miles, and takes 9.5 hours of driver labor. ABC charges Customer 2 $4.85 per hundred pounds.

Unit costs and productivity are as follows:

Pickup and/or delivery fuel economy 8.0 miles per gallon

Linehaul fuel economy 6.0 miles per gallon

Cost per gallon for fuel $2.50 per gallon

Labor cost $22.00 per hour; pickup/delivery, $20.00 per hour; dock, $22.00 per hour or $.36 per mile

Pickup and/or delivery equipment cost $25,000 tractor; $13,000 trailer

Linehaul equipment cost $50,000 tractor; $15,000 trailer.

Depreciation: Tractor 5 years Trailer 7 years

Maintenance and Insurance $.18 per mile

Billing/Rent/Other $4.45 per shipment

(Equipment includes both tractor and trailer)

Answer 1

cubic feet destinati cubic Details Stops Mileage hours of driver labor shipment Trailer capacity feetrequired on Handlin 200 ent Monda 23 16 Wednesdays13 600 240 2880 Customer 1 45 50 85 10.5 9.5 9.5 30mts 9000 42000 1800 3000 750 customer 2 Calculations Pickup and delivery fuel econo Customer 1 customer 2 Cost per gallon of fuel 480 2.50 1200 400 2.5 60 8 50 8 480 400 1000 Linehaul fueleconom Customer 1 Customer 2 270 510 270*2.5 510* 2.5 675 45% 85 6 Total fuel cost: customer 1 is 1875 and customer 2 is 2275 1275 Labor cost Customer1 (11+10.5) 22+(23+16) 20+handlingtime *22 Customer 2 (9.5+9.5) 2213+9) *20H85-50 22 1258.5 1628 Equipment cost Customer 1 Customer 2 (25000)+13000*600/ (25000) (13000 *9000)/42 (15000 240)/276445 Tractor ttrailertLinehaul Tractor ttrailertLinehaul 15000 1800186785.7143 Shipment cost Customer 1 Customer 2 5.25/100 pounds 4.85/100 pounds 5.25*6 4.85*90 31.5 436.5 Maintenance and insurance Customer 1 Customer 2 0.18per mile 0.18per mile 0.18 200 0.18 750 36 135 Total cost for one shipment- customer 1 Customer 2 Equipment cost+labor cost+fuel c 1875+1258.5+76445+31.5+36 2275+1628+86785.72+436.5+135 aintenance cost+ shipment cost Profit Customer 1 Customer 2 total cost-(labor cost+fuel cost+maintenance cost)trent