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5. Product movement from A to B has an average (fully allocated cost) of $60. It is known that there is limited competition to
5. Product movement from A to B has an average (fully allocated cost) of $60. It is known that there is limited competition to B, so it is possible to ask 25% higher prices. However, on the way back the it is challenging to get any freight without 30% discount in rates. The cost of moving the truck empty back from B to A is 25% cheaper than on the way to B. What would be your headhaul and backhaul rates, if you looked at it from a) Accounting perspective (value of service as price floor and price ceiling) (2 points) b) Economic perspective (cost of service as price floor and value of service as ceiling) (2 points)
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