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17 June, 06:55

Suppose you manage a delivery company and you must choose between two transportation methods: (a) truck or (b) train. (a) Trucks: Costs U$ 26,000 upfront. For each mile it runs it costs U$ 2.00 in gas. Maintenance costs U$ 4,000 per year and additional U$ 1.00 per mile run. (b) Train: To lease a container that carries the same volume of orders as the truck it costs U$ 10.000 per year. In addition it costs U$ 4.00 per mile to move orders around. Suppose you had to transport packages over 5000 miles in 2017. What's your average cost for that year?

A: U$ 6.60 for (a) truck and US 2.80 for (b) train.

B: U$ 9.00 for (a) truck and U$ 6.00 for (b) train.

C: U$ 3.00 for (a) truck and U$ 4.00 for (b) train.

D: U$ 6.00 for (a) truck and U$ 2.00 for (b) train.

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  1. 17 June, 07:22
    0
    The correct answer is (B) U$ 9.00 for (a) truck and U$ 6.00 for (b) train.

    Explanation:

    Average Cost = Total Cost / Total miles Run = Total Cost / 5000

    Total Miles Run = 5000

    a) Calculations FOR TRUCK

    Data that is given:

    $ 26,000 upfront;

    U$ 2.00 in gas per mile run

    Maintenance costs U$ 4,000 per year

    Additional U$ 1.00 per mile run

    Total Miles Run = 5000

    Total Cost = 26000 + 2*Total Miles Run + 4000 + 1*Total Miles Run = 26000+2*5000+4000+5000 = $45000

    ⇒Average Cost of a TRUCK = Total Cost/5000 = 45000/5000 = $9

    b) Calculations for train:

    It costs U$ 10.000 per year

    $ 4.00 per mile to move orders around

    Total Cost for Train = 10000 + 4*Total Miles Run = 10,000 + 4*5000 = 30,000.

    ⇒Average Cost of Train for That year = Total Cost of Train / 5000 = 30,000/5,000 = $6

    So, $9.00 for truck and $6.00 for train.
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