Cascades management is considering the proposal from FHP. There are many issues involving strategy, cost, risk, and capacity. Prepare a recommendation to management. Use the following questions to guide your analysis.

1. Assume Cascade could service the contract with existing equipment. Use Exhibit 1 to identify the relevant costs concerning the acceptance of FHPs request to add two additional loads per week. Which costs are not relevant? Why?
2. Calculate the contribution per mile and total annual contribution associated with accepting FHPs proposal. What do you recommend? (Use 52 weeks per year in your calculations.)

Exhibit 1 Income from Operations (All financial information in the case has been scaled and disguised for educational purposes.) Cascade Trucking and Freight Income from Operations For the year ending December 31, 2013 Revenue Line Haul Fuel Surcharge Miscellaneous Total Revenue E 12/31/2013 $20,925,280 4,950,160 450,120 $26,325,570 Per Mile $1.86 0.44 0.04 $2.34 0.06 0.78 0.01 0.01 675,120 8,775,190 112,700 112.550 787,630 4,950,160 255,120 15,638,480 0.07 0.44 0.02 1.39 0.01 0.02 0.02 Variable Expenses Insurance Fuel Oil Lubricants Tolls Parts and Small Tools Hourly Wages: Drivers Trailer Pool Expense Total Variable Fixed Expenses Insurance General Liability Physical Damage Workers Compensation Health Insurance Security Depreciation Salaries, Benefits (Garage) Salaries, Benefits (Office) Bad Debt Expense Permits Rental Equipment Payroll Taxes Accounting Fees, Supplies, Computer Maintenance Miscellaneous Total Variable Income from Operations Note: Parilo values are based on 11.250.000 miles and have been rowded to two decimal places 0.02 0.01 0.19 0.06 112,620 225,010 226,000 224,500 111,750 2,137,500 675,000 1,012,520 113,500 111,520 1,013,000 562,500 112,350 337.510 6,975,280 $3,681,810 0.09 0.01 0.01 0.09 0.05 0.01 0.03 0.62 S0.33