Economics Exam Question and Answer
The total cost will increase because the additional driver will cost the same amount as the one driver plus and they will be doing the same job in the same tractor but at different times. The line haul expanse will shoot up and as a result, the total cost will increase. Adding another driver will only speed up the transportation process but will not, in any case, be used as a means of lowering the total expenses incurred in the move (John, Coyle, Robert, Navick, Gibson 2010).
The lack of backhaul to return the vehicle will result in the vehicle standing idle at the distribution terminal. This is the reason why the full day’s depreciation is charged on the PUD trailer even though the trailer was used on the one-way move or used for only have a day. One may argue that this actually places an extra cost burden on the freight through fixed –cost allocation. This argument might be true but, the cost analyst is all responsible for making the decision where the fixed cost will be recovered from. if the fixed cost will not be recovered from this allocation then it must be recovered from some other places so that the debt can be served and the equipment replacement plans are implemented.
If Hardee lacks backhaul to return the vehicle and the driver to Pittsburg they will encounter still costs in this move although smaller than the first move. Since this is a business each cost must be accounted for so that profits are maximized. The cost incurred as a result of empty haul should be accounted for as motor carrier cost since this cost is the one that caters for transportation of the products from the premised to the market place. This cost cannot be avoided and therefore must be technically handled so that it may not eat much into the profit of the business.
Because the vehicles must use fuel drivers must be paid and the taxes and the costs involved in using the public roads must also be paid. Without properly structuring this cost of transport a company may find that it is running on debts or loses. For me, I could devise a method whereby the return journeys also involves some business activity so that we generate some profits to pay the vehicle expenses and the drivers. This will ensure that the business is run properly (David Simchi Levi, Philip Kaminsky, and Edith Simchi Levi, 2010).
David, Simchi Levi, Philip Kaminsky, and Edith Simchi Levi (2010). Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies. Irwin McGrawHill,
John, J. Coyle, Robert, A. Navick, Gibson (2010) what will happen to total cost? Pg 528
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