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1 Solutions Plus is an industrial chemicals company that produces specialized cleaning fluids and solvents for a wide variety of applications. Solutions Plus just received an invitation to submit a bid to supply Great North American railroad with a cleaning fluid for locomotives. Great North American needs the cleaning fluid at 11 locations (railway stations); it provided the following information to Solutions Plus regarding the number of gallons of cleaning fluid required at each location (see Table 6.8). Table 6.8 Gallons of Cleaning Fluid Required at each Location Location Santa Ana El Paso Gallons Required 22,418 6,800 Pendleton 80,290 0.83 0.49 Pendleton Houston Kansas City 0.45 0.36 0.22 Los Angeles Glendale 0.22 Jacksonville 0.34 - Little Rock 0.34 Bridgeport 0.34 Sacramento 0.15 To submit a bid to the railroad company, Solutions Plus must determine the price per gallon it will charge. Solutions Plus usually sells its cleaning fluids for 15% more than its cost to produce and deliver the product. For this big contract, however, Fred Roedel, the director of marketing, suggested that maybe the company should consider a smaller profit margin. In addition, to ensure that if Solutions Plus wins the bid, it will have adequate capacity to satisfy existing orders as well as accept orders for other new business, the management team decided to limit the number of gallons of the locomotive cleaning fluid produced in the Cincinnati plant to 500,000 gallons at most. Managerial Report You are asked to make recommendations that will help Solutions Plus prepare a bid. Your report should address, but not be limited to, the following issues: 1. If Solutions Plus wins the bid, which production facility (Cincinnati or Oakland) should supply the cleaning fluid to the locations where the railroad locomotives are cleaned? How much should be shipped from each facility to each location? 2. What is the breakeven point for Solutions Plus? That is, how low can the company go on its bid without losing money? 3. If Solutions Plus wants to use its standard 15% markup, how much should it bid? 4. Freight costs are significantly affected by the price of oil. The contract on which Solutions Plus is bidding is for two years. Discuss how fluctuation in freight costs might affect the bid Solutions Plus submits