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 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.

Answer 1

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