Question
Which of the following customers should ABC Truckline serve and why should they choose that customer to serve based on the relevant facts below? Please
Which of the following customers should ABC Truckline serve and why should they choose that customer to serve based on the relevant facts below? Please include a breakdown of your thoughts for reference.
ABC Truckline is trying to determine which of two customers to serve, based on average profitability. The relevant facts are as follows:
Customer 1 is picked up on Mondays. The pickup is part of a route that averages 23 stops, covers 60 miles during the route, and generally requires 11 hours of driver labor. The average shipment from Customer 1 is 600 pounds and 240 cubic feet. Linehaul trailer capacity is 40000 pounds and 2880 cubic feet, and the destination 200 miles away. Delivery for Customer 1 involves a route that covers 16 stops, 45 miles, and takes 10.5 hours of driving. ABC charges Customer 1 $5.25 per hundred pounds. Handling at origin and destination is 15 minutes at each end.
Customer 2 is picked up on Wednesdays. The pickup is part of a route that averages 13 stops, covers 50 miles, and requires 9.5 hours of driver time. The average shipment from Customer 2 is 9000 pounds and 1800 cubic feet. Linehaul trailer capacity is 42000 pounds and 3000 cubic feet, and the destination is 750 miles away. Delivery for Customer 2 involves a route that covers 9 stops, 85 miles, and takes 9.5 hours of driver labor. ABC charges Customer 2 $4.85 per hundred pounds.
Unit costs and productivity are as follows:
Pickup and/or delivery fuel economy 8.0 miles per gallon
Linehaul fuel economy 6.0 miles per gallon
Cost per gallon for fuel $2.50 per gallon
Labor cost $22.00 per hour; pickup/delivery, $20.00 per hour; dock, $22.00 per hour or $.36 per mile
Pickup and/or delivery equipment cost $25,000 tractor; $13,000 trailer
Linehaul equipment cost $50,000 tractor; $15,000 trailer.
Depreciation: Tractor 5 years Trailer 7 years
Maintenance and Insurance $.18 per mile
Billing/Rent/Other $4.45 per shipment
(Equipment includes both tractor and trailer)
I need your opinion on why you would choose one or the other...not just a breakdown in numbers but WHY you would choose to go with A or B.
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