Question

Costing Models You work for XYZ trucking and your boss has asked you to figure out how much the firm should charge a new customer to make a full Truckload delivery and make a 15% profit. The firm knows that it will find a backhaul customer, so you only need to worry about the cost for the move. The shipment consist of 650 boxes weighing 45 pounds each, and measuring 4 cubic feet each. The trailers that your company uses can carry 46,000 pounds and have a volume of 3,600 cubic feet. You calculate that it will take 4 hours to drive from your terminal to the customer’s factory, wait for the truck to be loaded and return to your terminal. The distance between your terminal and your customer’s factory is 15 miles. Your line haul driver will then take the truck to the consignee and deliver the boxes. The total distance from your terminal to the consignee is 800 miles and will take the driver 18 hours. Once at the consignees it will take 4 hours to offload the truck. Then the driver will go to the XYZ trucking terminal in the same city, which is 15 miles away.

What would you recommend to your boss that the price should be set per cwt to complete this move? (Make sure to show your calculations) The equipment cost data is as follows:

Equipment Cost Data

Equipment Purchase Price

Line-haul tractors $125,000

Trailers $ 36,000 53-foot dry van

Depreciation

Tractors 4 year straight line

Trailers 7 year straight line

Interest

Tractors 4% APR for 4 years

Trailers 4% APR for 7 years

Fuel

Per Gallon $ 3.82

Line-haul tractors 7 miles per gallon

Labor Cost

Line-haul drivers $ 0.47 per mile

PUD operation drivers $ 20.00 per hour

Miscellaneous

Insurance cost $ 0.052 per mile

Maintenance cost $ 0.152 per mile

Billing cost $ 3.00 per freight bill

Administrative overhead 15% of total cost

Equipment available for use 365 days, 24 hours per day = 8,760 hours per year.

Answer 1

Given the Details

Shipment	650	Boxes	45	lb	each	4	cubic ft	each
	650	Boxes	29250	lb	Total	2600	Cubic Ft	Total
Trailers used	46000	lb	3600	cubic feet
Time Taken
T(TF):Terminal to Customer to Terminal	4	hours
D(TF)- Distance between Terminal and customer factory	15	miles	Total Distance to and fro			30	Miles
D(TC)- Totla Distance between Terminal and Consignees	800	miles
T(TC): Total Time to deliver to consignees from Terminal	18	hours
T(OF) : Offload Time at Consignee	4	hours
D(XYZ): Distance to go to XYZ terminal after offload	15	miles	Total Distance for driver			815	miles
T(XyZ)=Time to go to XYZ Terminal	0.3375	ours	Total hours for the driver			22.3375	hours
To Clear the Shipment of	29250	Lb	and	2600	Cubic Ft
We required one trailer	46000	Lb	and	3600	cubic ft

The Costing Details are given below

Equipment Cost Data
Equipment	Purchase Price
Line-haul tractors	125000	Dollar
Trailers	36000	Dollar
Depreciation
Tractors 4 year straight line	31250	per year
Trailers 7 year straight line	5143	per year
Interest
Tractors 4% APR for 4 years	5000	per year
Trailers 4% APR for 7 years	2520	per year
Fuel
Per Gallon	3.82	per gallon
Line-haul tractors	7	miles/Gallon
Labor Cost
Line-haul drivers	0.47	per mile
PUD operation drivers	20	per hour
Miscellaneous
Insurance cost	0.052	per mile
Maintenance cost	0.152	per mile
Billing cost	3	per freight bill
Administrative overhead	15%	of total cost
Equipment available for use 365 days, 24 hours per day = 8,760 hours per year.

We develop a model to find costs which include line haul costs,PUD costs,Depreciation cost and Interest cost for the trip

Line Hauling Cost
	Distance(miles	Fuel used (Gallon)	Total cost
Fuel	30	4.29	16.37
	Distance	Per mile Cost	Total Cost
Driver	30	0.47	14.1
insurance	30	0.052	1.56
Mainenance	30	0.152	4.56
Total Cost for lin haul			36.59
Picup and delivery Costs
	Distance(miles	Fuel used (Gallon)	Total cost
Fuel	815	116.43	17.46
	Hours or Distance	Per mile or hour Cost	Total Cost
Driver	22.3375	20	446.75
insurance	815	0.052	42.38
Mainenance	815	0.152	123.88
Total Cost for PUD			630.47
Depreciation Costs
Equipment Available		8760	hours per year
Tractor Depreciation /year		31250	dollar /year
Trailer Depreciation/year		5143	Dollar /year
Tractor Dep per hour		3.57	dollar /hour	31250/8760
Trailer Dep. Per hour		0.59	dollar /hour	5143/8760
Depreciation cost for Tractor Fro Trip		79.69	Dollar	For 22.3375 hours
Depreication cost forTrailer for trip		2.35	Dollar	For 4 hours
Total Depreciation Costs		82.03
Interest Costs
Tractor Interst per year		5000	per year	8760	hours
Trailer Interest per year		2520	per year	8760	hours
Tractor interest approtioned for 22.3375 hours		39.14	Dollar
Trailer Interest apportioned for 4 hours		13.90	Dollar
Total Interest Cost		53.04	Dollar
ITEM	COSTS
Line Haul Costs	36.59
PUD Costs	630.47
Depreciation Cost	82.03
Interest Cost	53.04
Billing cost	3
Sub total	805.14
Admin Cost	120.77	15% of subtotal
TOTAL COSTS	925.91
Profit	138.89
Total Price	1064.80
Shipment Weight	29250	lb
	292.5	Cwt
Price Per Cwt	3.64	Dollar

Price Per Cwt is 3.64 dollar.