Question: Over-land can increase capacity in different ways to accommodate the additional loads if they accept FHPs contract. Why might Over-land use an independent operator (variable cost of $1.65/mile) over purchasing a rig and hiring a driver for a lower variable cost ($1.39/mile)? Calculate at what point (in miles) Over-land would be indifferent between purchasing a new rig and using an independent operator.

Generally Accepted Accounting Principles (GAAP) but presents costs by behavior. Exhibit 2 presents Over-land Trucking and Freight's balance sheet for the year ending December 31, 2013. Exhibit 2 Over-land Balance Sheet Exhibit 1 Income from Operations (All financial information in the case has been scaled and disguised for educational purposes.) Over-land Trucking and Freight Balance Sheet For the year ending December 31, 2013 Over-land Trucking and Freight Income from Operations For the year ending December 31, 2013 Assets Current Assets Revenue Cash $200,000 300.000 Line Haul Fuel Surcharge Miscellaneous Total Revenue FYE 12/31/2013 $20.925,280 4,950,160 450.120 $26,325,560 Per Mile $1.86 0.44 0.04 $2.34 Accounts Receivable Total $500,000 Variable Expenses Insurance Property Plant and Equipment Land Buildings Accumulated Depreciation Buildings Tractors, Trailers, and Equipment Accumulated Depreciation 1,000,000 3,000,000 (1,250,000 18,650,000 (4.750,000 Total 675,120 8,775,190 112,700 112,550 787,630 4,950,160 255.120 15,668,470 Fuel Oil Lubricants Tolls Parts and Small Tools Hourly Wages: Drivers Trailer Pool Expense Total Variable $16.650.000 Total Assets $17,150,000 Liabilities and Equity Current Liabilities Trailer Pool Expense Total Variable 255.120 15,668,470 Liabilities and Equity Current Liabilities Accounts Payable Taxes Payable Current Portion of Long-Term Debt Total Current Liabilities 150,000 65,000 35.000 $250,000 1,865,000 $1.865.000 $2,115,000 Fixed Expenses Insurance General Liability Physical Damage Workers Compensation Health Insurance Security Depreciation Salaries, Benefits (Garage) Salaries, Benefits (Office) Bad Debt Expense Permits Rental Equipment Payroll Taxes Accounting Fees, Supplies, Computer Maintenance Miscellaneous Total Fixed 112,620 225,010 226,000 224,500 111,750 2,137,500 675,000 1,012,520 113,500 111,520 1,013,000 562,500 112,350 Long-Term Liabilities Notes Payable Total Long-Term Liabilities Total Liabilities Owner's Equity Contributed Capital Retained Earnings Total Owner's Equity 3,550,000 11.485.000 $15,035,000 Total Liabilities and Owner's Equity $17,150,000 337.510 6,975,280 Income from Operations $3,681,810 Note: Per mille values are based on 11.250.000 miles and have been rounded to two decimal places