Costing Models

You work for XYZ trucking and your boss has asked you to figure out how much the firm should charge a new customer to make a full Truckload delivery and make a 15% profit. The firm knows that it will find a backhaul customer, so you only need to worry about the cost for the move.

The shipment consist of 450 boxes weighing 85 pounds each, and measuring 4 cubic feet each. The trailers that your company uses can carry 46,000 pounds and have a volume of 3,600 cubic feet.

You calculate that it will take 3.5 hours to drive from your terminal to the customer's factory, wait for the truck to be loaded and return to your terminal. The distance between your terminal and your customer's factory is 25 miles.

Your line haul driver will then take the truck to the consignee and deliver the boxes. The total distance from your terminal to the consignee is 1000 miles and will take the driver 32 hours. Once at the consignees it will take 4 hours to offload the truck. Then the driver will go to the XYZ trucking terminal in the same city, which is 20 miles away.

What would you recommend to your boss that the price should be set per cwt to complete this move?

(Make sure to show your calculations)

The equipment cost data is as follows:

Equipment Cost Data

Equipment Purchase

Price

Line-haul tractors $110,000

Trailers $ 35,00053-foot dry van

Depreciation

Tractors 4 year straight line

Trailers 7 year straight line

Interest

Tractors. 5% APR for 4 years

Trailers. 5% APR for 7 years

Fuel

Per Gallon. $3.56

Line-haul tractors. 7 miles per gallon

Labor Cost

Line-haul drivers. $0.47 per mile

PUD op drivers. $ 21.00. per hour

Miscellaneous

Insurance cost. $0.057 per mile

Maintenance cost. $0.146 per mile

Billing cost. $2.50 per freight bill

Admin overhead. 15%. of total cost

Equipment available for use 365 days, 24 hours per day = 8,760 hours per year.