Question

Two companies are located 30 miles apart and both supply each other with goods. Eight times a month they send their trucks to each other full of cargo and then they return empty. Each driver costs $175 per day with benefits (the round trip takes all day) and each firm has truck operating costs of $1.30 a mile

1. How much would each company save monthly if they sent their trucks just twice a week and hauled the other’s cargo on the return?
2. How much would each company save monthly (in total) if there was a $0.30 per mile emission tax on all business truck travel?

Answer 1

Solution 1) Calculation of Monthly savings for the company if they sent their trucks just twice a week and hauled the other’s cargo on the return.

Calculation of Current Cost per month per company

	$
Operating Cost (30 Miles x 2 x $1.3)	78.00
Driver Cost	175.00
Cost per Trip	253.00
Cost per month per company = Cost per Trip x 8 Trips	2,024.00
Total Cost for both the companies = Cost per month per company x 2	4,048.00

There will be requirement on only one truck for managing the cargo of both the companies.

Therefore, total cost for both the companies:

	$
Operating Cost (30 Miles x 2 x $1.3)	78.00
Driver Cost	175.00
Cost per Trip for both the companies	253.00
Total cost for both the companies per month = Cost per Trip for both the companies x 8 Trips	2024.00
Cost per Month per company = Total cost for both the companies per month / 2	1012.00

Therefore, Savings in the cost per month per company

= Current Cost per month per company – New Cost per Month per company

= $2,024 - $1,012 = $1,012

Therefore, the savings in the monthly cost for each company is $1,012.

Solution 2) Calculation of Monthly savings for the company if there was a $0.30 per mile emission tax on all business truck travel

Current Situation

	$
Operating Cost (30 Miles x 2 x $1.3)	78.00
Driver Cost	175.00
Emission Tax (0.3 x 30 Miles x 2)	18.00
Cost per Trip	271.00
Cost per month per company = Cost per Trip x 8 Times	2,168.00
Total Cost for both the companies = Cost per month per company x 2	4,336.00

There will be requirement on only one truck for managing the cargo of both the companies.

Therefore, total cost for both the companies:

	$
Operating Cost (30 Miles x 2 x $1.3)	78.00
Driver Cost	175.00
Emission Tax (0.3 x 30 Miles x 2)	18.00
Cost per Trip for both the companies	271.00
Total cost for both the companies per month = Cost per Trip for both the companies x 8 Trips	2168.00
Cost per company per month = Total cost for both the companies per month / 2	1084.00

Total Savings for both the companies

= Total Cost for both the companies – New Total cost for both the companies per month

= $4,336 - $2168 = $2,168 per month

Savings per company per month

= Current Cost per company per month – New Cost per company per month

= $2,168 - $1,084 = $1,084