bulance sheet for the year eding Deceber 31, 2015 Regulred: Overld's m o st is considering the proposal from FHP. There are many cen imvolving strategy, cost, risk, od capacity. Prepare recommendation to management. Use the following questions to guide your analysis. 1. AND Overland could service the contract with existing equipment. Une Exhibit 1 to identify the relevant costs concerning the acceptance of FHP's request to add two additional loads per week. Which costs are not relevant? Why? 2. Calculate the contribution per mile and total cual contribution associated with accepting FHP's proposal. What do you recommend? (Use 52 weeks per year in your calculations.) 3. Consider the strategic implications (including risks) associated with expanding (or choosing bot to expand operations to meet the demands of FHP. 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. Asume Overland'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 Over-land would sign a five-year contract. What is the annual number of miles required for Overland to break even, assuming the company adds one truck and trailer? bulance sheet for the year eding Deceber 31, 2015 Regulred: Overld's m o st is considering the proposal from FHP. There are many cen imvolving strategy, cost, risk, od capacity. Prepare recommendation to management. Use the following questions to guide your analysis. 1. AND Overland could service the contract with existing equipment. Une Exhibit 1 to identify the relevant costs concerning the acceptance of FHP's request to add two additional loads per week. Which costs are not relevant? Why? 2. Calculate the contribution per mile and total cual contribution associated with accepting FHP's proposal. What do you recommend? (Use 52 weeks per year in your calculations.) 3. Consider the strategic implications (including risks) associated with expanding (or choosing bot to expand operations to meet the demands of FHP. 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. Asume Overland'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 Over-land would sign a five-year contract. What is the annual number of miles required for Overland to break even, assuming the company adds one truck and trailer
