Question: Prepare a fixed-variable and over/under pricing structure for the three private fleet opportunities listed below. Prepare a pro forma income statement for the three private

  1. Prepare a fixed-variable and over/under pricing structure for the three private fleet opportunities listed below.
  2. Prepare a pro forma income statement for the three private fleet opportunities listed below.
  3. Rank the three opportunities in order of preference.
  • Variable Costs
  • Driver Pay: $0.40/mile
  • Fringe Benefits: 35% of wages
  • Fuel: $2.42/Gallon and 8 MPG (new Freightliner Cascadia)
  • Maintenance: $0.15/mile
  • Insurance: $0.13/mile
  • Fixed Costs
  • Tractor Depreciation: $45,000/year/tractor
  • Trailer Depreciation: $5,800/year/trailer
  • Legalization/Recruiting/Administration: $20,000/year/driver
  • Tractor Cost: $135,000
  • Trailer Cost: $29,000
  • Company will finance 75% of the capital investment
  • Interest Rate: 6% (calculate as simple annual interest)
  • Effective Tax Rate: 38%
  • ROA Hurdle Rate for New Capital Investments: 6%
  • OR Target Rate for Truckload Operations: 88%
  • Weeks per year: 52
  • Length of contract: 3 years

Mutually Exclusive

Fleet Opportunities

Fleet Opportunity

A

B

C

Fleet Summary:

Tractors

5

8

12

Trailers

10

24

30

Utilization (Weekly Miles per Tractor)

2,800

2,900

2,100

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