Ann Arbor Railroad $($AAR$)$ is a railroad company that is partly financed by the US Department of Transportation through its high$-$speed rail stimulus initiative. AAR operates daily train service between Detroit, MI and Chicago, IL$.$ The Company operates two classes of passenger trains: slow$-$speed and high$-$speed. AAR built and currently maintains a roadbed and tracks between the two cities as well as stations in both Detroit, MI and Chicago, IL$.$ The tracks and signaling equipment cost approximately $$1$ million per mile to build and will be depreciated over thirty years.

The bulk of the Company$$s station$-$related costs arise from the Detroit and Chicago stations. Costs for the intermediate stations, which are only used by the slow$-$speed trains, are largely paid for by the local municipalities.

AAR does not own any trains, but leases them. Specifically, it leases $10$ high$-$speed trains $($locomotives plus carriages$)$ from Siemens AG and $10$ slow$-$speed trains $($locomotives plus carriages$)$ from GE$.$ Locomotives refer to the motorized entity pulling the carriages. Carriages carry passengers but are unable to move autonomously. The Company is responsible for maintaining the trains. The high$-$speed trains are technologically advanced and more costly than the slow$-$speed trains, which are technologically simpler and older. AAR employs the train engineers and the onboard service staff.

The Company has contracted with Gourmet Services to provide complimentary food and drinks to high$-$speed passengers. The contract entails a fixed monthly payment of $$700,000$ plus $$8$ per passenger. Slow$-$speed train passengers receive no complimentary items; they can buy food and beverages from an independent catering company with no profit or loss for AAR.

Projected cost and travel volume data appear in Tables $1$ and $2.$ Please refer to these to answer the following questions. The data are only approximate and have been modified to ease computations.

Table $1.$ Ann Arbor Railroad $$ Projected Cost for March $20$X$0$

COST TYPE COST ELEMENTS AMOUNT

Head office$-$related

$($in Detroit station$)$

Administrative personnel, marketing costs, IT costs

$$500,000$ per month

Roadbed, track, and signaling equipment$-$related

Depreciation of track & signaling equipment

Interest payments

$$1,000,000$ per month

$$500,000$ per month

Maintenance workers

Repair materials

$$5,000$ per month

$$200$ per slow$-$speed trip

$$400$ per high$-$speed trip

Station$-$related Building costs $($temperature control, leasing costs, etc.$)$ and other costs $($including cleaning service, ticket, and baggage handling personnel$)$

Detroit: $$20,000$ per month Chicago: $$32,000$ per month All other stations combined:

$$7,000$ per month

Train$-$related Leasing costs $$ slow$-$speed train

Leasing costs $$ high$-$speed train

$$100,000$ per month per train

$$500,000$ per month per train

Hauling costs $($power and fuel$)$

Engineers and onboard service staff total

$$5,000$ per slow$-$speed trip

$$8,000$ per high$-$speed trip

$$150,000$ per month

Onboard services Gourmet services contract $$700,000$ per month

$$8$ per passenger

Table $2.$ Ann Arbor Railroad $$ Projected Business for March $20$X$0$

VOLUME Slow$-$Speed High$-$Speed

Trips $200300$

Total Passengers

$($over all trips$)$

$75,000100,000$

Average Ticket Price $$50$ $$180$

Note: Passenger volumes and fares are averaged across trips. Trips and Average Ticket Price both refer to round trips.$\backslash$table$[[$Cost type,Cost elements,FC $($a$),$UVC $($b$),$Activity level $($X$),$Total cost $($a$+$bx$)],[\backslash$table$[[$Head office$-$related $($Detroit$],[$station$)]]],[,\backslash$table$[[$Administrative personnel, marketing$],[$costs$,$ IT costs$]],,,,],[\backslash$table$[[$Roadbed$,$ track, and signaling$],[$equipment$-$related$]]],[,\backslash$table$[[$Depreciation of track & signaling$],[$equipment$]],,,,],[,$Interest Payments,,,,$],[,$Maintenance Workers,,,,$],[,$Repair Materials $-$ slow$-$speed train,,,,$],[,$Repair Materials $-$ high$-$speed train,,,,$],[$Station$-$related$],[,$Detroit,,,,$],[,$Chicago,,,,$],[,$All other stations combined,,,,$],[$Train$-$related$],[,$Leasing costs $-$ slow$-$speed train,,,,$],[,$Leasing costs $-$ high$-$speed train,,,,$],[,$Hauling costs $-$ slow$-$speed,,,,$],[,$Hauling costs $-$ high$-$speed trip,,,,$],[,\backslash$table$[[$Engineers and onboard service staff$],[$total$]],,,,],[$Onboard Services$],[,$Gourmet services contract,,,,$],[$Total$,,,,,]]$

What is the total projected cost for March $20$X$0?(5$ points$)$