1. Assume Over-land could service the contract with existing equipment. Use 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?
Acceptance of FHP’s request with existing equipment 90 trucks and 180 trailers in the short time variable costs are relevant and fixed costs are irrelevant. In the short run Over-land can avoid fixed costs but in the long run fixed costs are unavoidable.
FHP’s request 1500 miles Per Load x2= 3000 miles extra in week.
Relevant Costs, Insurance, Fuel, Oil Lubricants, Tolls, Parts and Small Tools, Hourly wages: Drivers, Trailer Pool Expense
Irrelevant Costs, Insurance (General Liability, Physical Damage, Workers Compensation, Health insurance), Security, Depreciation, Salaries Benefits, Bad Debt Expense, Permits, Rental Equipment, Payroll Taxes, Accounting Fees, Supplies, Computer Maintenance, Miscellaneous.
2. Calculate the contribution per mile and total annual contribution associated with accepting FHP’s proposal. What do you recommend? (Use 52 weeks per year in your calculations.) FYE 12/31/13 Per Mile
Revenue $26,325,570 $2.34
Variable Expenses 15,638,480 1.39
Fixed Expenses 6,975,280 0.62
Contribution Margin 3,681,810 $0.33 3000*52=156000 miles (Extra Annually) Per Mile
Revenue $335,400 $2.15
Variable Cost 216,840 1.39
Contribution Margin 118,560 0.76
In the short run fixed
Going into 2004, Bob Moyer planned to produce 10,000 bicycles at Mile High Cycles. Construction of his bicycles includes the utilization of three departments, frames, wheel assembly, and final assembly. During this year, Mile High Cycles ended up actually producing 10,800 bicycles to meet higher than expected demand. Bob is curious as to whether or not he was successful in maintaining costs to meet these higher levels of demand.
Hardee Transportation is a small truckload business, and it is currently faced with a problem that practically every company has; how to better serve its customers, and maintain a profitable return. It is essential that companies such as these evaluate their operations to ensure that it possesses the most efficient way to manage their assets. There is a great concern for these companies considering that the competition is out there, providing the same services at a lower cost, or accommodating their customer needs more fittingly. Hardee Transportation must take a look at their operations and come up with some plausible solutions to increase their revenue operations,
Cost of insurance such as Employer’s Liability Insurance and Public Indemnity Insurance, insuring the offices, insuring company vehicles. Cost of fees for running the office e.g. cost of managers wages,
Manufacturing overhead Rent on production equipment........ $ 6,000 Insurance on factory building ....... 1,500 Depreciation on factory building............................................ 1,500 Utility costs—factory........................ 900 Property taxes on factory building............................................ 400 Miscellaneous expenses— factory .............................................. 1,000 Total manufacturing costs..................... Total cost of work in process ...............
Did you know that the Ford Super Duty has 6.7L Power Stroke, with best-in-class power and fuel economy? Of course you didn’t. It has 440 horse power, 860 ft-lb of standard torque, unique supercharging for on-demand performance, and most of all it is clean and quiet. The Ford Super Duty can tow up to around 31,200-lb. The f-450 has upgradable suspension, tires, and towing gear. When purchasing the f-450 Super Duty, it comes with a high capacity trailer tow package, with some features including wide track front axle. And it all comes at a price of only $32,385. While paying $475 a month with no financing.
The trucking company currently owns 100 trailers and a new client have requested 20 more for a total of 120 trailers for its project. The relationship with the new client is uncertain but at the same time it has potential for significant growth of the company. The uncertainty of the relationship may have an effect on the financial position of the client company. The additional trailers may be obtained by the trucking company through either a lease option or by direct financing. If the trucking company is considering leasing the additional trailers to provide to their new client they must first understand
Financially speaking Sun Hydraulics has seen measure growth in sales from 1996 through 2000. Their revenues have grown from $47,374,000 to $66,268,000 from 1996 to 2000 respectively, but I was disappointed in Sun’s fluctuating profitability during this same time, seemingly caused by continually growing labor cost. As a percent of sales, profitability fluctuated from (1%) in 1996 to a high of 7% in 1998. There were steady increases in Labor and Manufacturing Overhead that have adversely affected the bottom line from the high water mark in 1998. As Allen looks to the future he faces a
1. What is the estimated project completion date? (Assume there are no holidays and ignore the sunk cost of the planning team’s effort)
real estate taxes, insurance, and area maintenance fees, which the company has to incur to stock products
Ongoing costs such as human resources (staffing needs) functions, development cost of external reporting and investors relations
Manufacturing companies almost always incur variable expenses. A big reason why is because to make products, you need raw materials. In this case we have Fly Ash (250,000), Gypsum (250,000), Lime (300,000) and Sand (40,000). Another variable expense will be Workers Labor (100,000) and Drivers (25,000). The workers will be working varying hours depending upon the production need. During busy times they might be working overtime, while in down times they could very well be asked to not come in for a day. This is all under the assumption that they are paid hourly and not on salary. If they were salaried it would be considered a fixed cost. The same goes with the drivers. They will be delivering the products on a demand basis. More trips when the company is busy and less when production is slow.
It is important when starting a business that the director estimates the ongoing costs. This will help the director to determine how much money must be made from tuition to cover such costs. Ongoing costs include items such as rent, insurance, phone, insurance, salaries, food (if it is provided), maintenance, cleaning, postage, and supplies. Ongoing costs are usually the monthly bills incurred by the
Wages, salaries, raw materials, utilities, rent and other costs are bases and around the prevailing interest rates. These cost factors it is likely to change over time and location.
Fixed cost: Rental Expense, Utilities Expense, Administration / Salaries Expenses, Maintenance Expense, Amortization of Pre-Operational Expense