Over-land Trucking and Freight Relevant Costs for Decision Making
The writer should using accounting knowledge to complete it. The writer needs to go through the case first, and then answer the question 1-7 one by one (Question 8 don't need to answer)which on the last page of the scanned doc. (some question may need to use excel) please let me know if there has any question.
Over-land Trucking and Freight Relevant Costs for Decision Making
Name
Course
Date
Relevant Costs for Decision Making
1. The relevant costs concerning the acceptance of FHP’s request to add two additional loads per week are
Insurance
Fuel
Oil Lubricants
Tolls
Parts and Small Tools
Hourly Wages: Drivers
Trailer Pool Expense
The relevant costs vary more loads are added and they are the incremental costs
These costs are not relevant
Fixed Insurance costs
Security
Salaries, Benefits (Garage)
Salaries, Benefits (Office)
Payroll Taxes
Accounting Fees, Supplies, Computer Maintenance
These costs are not relevant in decision making as they remain fixed even when there are two additional loads per week or other changes in loads.
2. Contribution represents the excess of sales revenue over variable expenses or direct costs allocated
Insurance: 0.06
Fuel: 0.78
Oil Lubricants: 0.01
Tolls: 0.01
Parts and Small Tools: 0.07
Hourly Wages: 0.44
Trailer Pool Expense: 0.02
Total Variable: 1.39
FHP offered a total of $2.15 per mile (including fuel service charge and miscellaneous fees)
Since contribution =revenue- variable expenses 2.15-1.39= $0.76
Total Contribution = no. of loads* miles per week* no. of weeks* Contribution per mile
= 2* 1500* 52* 0.76 = 118560
Contract Revenue (per mile)
|
$2.15
|
Variable Expenses (per mile)
|
$1.39
|
Contribution Margin (per mile)
|
$0.76
|
Loads/ week
|
2
|
Miles/load
|
1500
|
Week/Year
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52
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Expected Annual Mileage
| ...
Updated on