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 400 boxes weighing 100 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 4 hours to drive from your terminal to the customers factory, wait for the truck to be loaded and return to your terminal. The distance between your terminal and your customers factory is 35 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 900 miles and will take the driver 30 hours. Once at the consignees it will take 4.5 hours to offload the truck. Then the driver will go to the XYZ trucking terminal in the same city, which is 45 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	$100,000
Trailers	$ 38,000		53-foot dry van
Depreciation
Tractors			4 year straight line
Trailers			7 year straight line
Interest
Tractors			4% APR for 4 years
Trailers			4% APR for 7 years
Fuel
Per Gallon	$ 3.60
Line-haul tractors			6 miles per gallon
Labor Cost
Line-haul drivers	$ 0.47		per mile
PUD operation drivers	$ 21.00		per hour
Miscellaneous
Insurance cost	$ 0.056		per mile
Maintenance cost	$ 0.130		per mile
Billing cost	$ 3.00		per freight bill
Administrative overhead	15%		of total cost

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