Question

Two manufacturing firms, located in cities 90 miles apart. Both send their trucks four times a week to the other city full of cargo and return empty. Each driver costs $275 per day with benefits (the round trip takes all day) and each firm has truck operating costs of $1.20 a mile.
a) How much each firm could save weekly if each sent its truck twice a week and hauled the other firm’s cargo on the return trip?
b) What would the savings be if there was a $0.20 per mile emission tax on all business truck travel?

Answer 1

Explanation:

Single trip Truck Operating Cost = Distance \times Per mile Cost = 90×1.2 = 108

Single Round Trip Truck Cost Operating Cost = Single Trip Truck Operating Cost  \times 2 = 108×2 = 216

Since, Single Round Truck trip takes 1 day and driver cost given in days, we can calculate the total cost by the following formula:

Single Round Truck Trip Total Cost = Single Round Trip Truck Cost Operating Cost + Driver Salary = 216 +275 = 491

Weekly Transportation cost to each manufacturing firm = No of Round Trip \times Round Trip Cost = 4×491 = 1964

Now, if each manufacturer send its truck twice a week and hauled the other firm's cargo on the return trip, then

New Weekly Transportation cost to each manufacturing firm = 2 \times Round Trip Cost = 2 × 491 = 982

So, Weekly saving = 1964 - 982 = 982