Calculate the contribution per mile and total annual contribution associated with accepting FHP's proposal. What do you recommend? (Use 52 weeks per year in your calculations.)

Consider the strategic implications (including risks) associated with expanding (or choosing not to expand) operations to meet the demands ofFHP. Analyze this question from a conceptual point of view. Calculations are not necessary.

After a closer examination of capacity, management believes an additional rig is required to service the FHP account. Assume Cascade's management chooses to invest in one additional truck and trailer that can serve the needs of FHP (at least initially). Assume the annual incremental fixed costs associated with acquiring the additional equipment is $50,000. Further, FHP would agree to pay $2.20 per mile (total including FSC and miscellaneous) if Cascade would sign a five-year contract. What is the annual number of miles required for Cascade to break even, assuming the company adds one truck and trailer?

What is the expected annual increase in profitability from the FHP contract? (Use 52 weeks per year in your calculations.)