Question

McTavish Transportation loads Intermodal containers onto railcars.  Each railcar can accommodate a maximum size load of 60 feet long x 8 feet wide x 8 feet high.  McTavish only loads three sized of intermodal containers:

	Short	Standard	Long
Container size (L x W x H) (in feet)	10 x 8 x 8	20 x 8 x 8	55 x 8 x 8
Price charged to customer:	$ 520	$ 900	$ 2,100
Variable cost per container	280	300	400

McTavish currently has space available on 10,000 railcars.  No additional railcars are available.

Fixed costs related to loading the railcars is $80,000.  This is allocated at $8 per foot of length.  (For example, a Short container would be allocated $80 in fixed costs)

Various customers have the following containers to be loaded.  Total demand is as follows:

Short:             36,000 containers

Standard:        18,000 containers

Long:                 3,000 containers

McTavish can pick and choose which containers are loaded and which customers to accept.

Required

How many rail cars would be required to satisfy all of the current demand?

How many of each container type should McTavish load?

Answer 1

REQUIRED:

a. How many railcars would be required to satisfy all of the current demand:, How many of each container type should Mctavish load:

Answer: Pl refer the calculations given below, we have not satisifed the demand of short by 30000. As we can accomodate 6 Short containers, we need 5000 railcar more to satisfy completely the present demand.

Pl see the calculations given below, we can load Long 3000, Standard 18000 & Short 6000.

NOTE: EACH RAILCAR CAN ACCMODATE A MAXIMUM SIZE OF 60*8*8
ie for short , long & standard it can 60000, 20000,10000
		PROFITABILITY ANALYSIS			AMT. $
			SHORT	STANDARD	LONG
PRICE CHAGED TO CUSTOMER			520	900	2100
LESS VARIABLE COST			280	300	400
	PROFIT		240	600	1700
	LESS FIXED EXP SHARE		80	160	440
	(PER FT 8)
	NET PROFIT		160	440	1260
	AS PER AREA USED
	THE PROFIT WILL BE		6	3	1
	PROFIT FOR DECISION		960	1320	1260
NOTE: AS WE HAVE HIGHEST PROFIT IN STANDARD CONTAINERS HENCE FIRST
CAPACITY WILL BE USED MAXIMUM DEMAND OF 18000
REST CAPACITY ie 10000-6000 (STANDARD) 4000*1 WILL BE USED FOR LONG.
demand is of only 3000, hence 3000 will be used.
REST CAPACITY WILL BE USED FOR SHORT ie. 1000*6=6000
NOTE: FOR LONG WE HAVE EQUAL CAPACITY ie 10000
FOR STANDARD WE HAVE 3 TIMES OF RAILCAR ie 30000
FOR SHORT WE HAVE 6 TIMES OF RAILCAR ie 60000
	NOTE: SIZE OF 55 HAS BEEN TREATED EQUIVALENT TO MAX 60.