A delivery company is considering adding another vehicle to its delivery fleet,

Question

A delivery company is considering adding another vehicle to its delivery fleet, all the vehicles of which are rented for $100 per day. Assume that the additional vehicle would be capable of delivering 1500 packages per day and that each package that is delivered brings in ten cents ($.10) in revenue. Also assume that adding the delivery vehicle would not affect any other costs.

a. What is the MRP? $_______

What is the MRC? $__________

Should the firm add this delivery vehicle?
(Click to select) Yes or No

b. Now suppose that the cost of renting a vehicle doubles to $200 per day. What are the MRP and MRC in this situation?

MRP = $ _______

MRC = $ _______

Should the firm add a delivery vehicle under these circumstances?
(Click to select) Yes or No

c. Next suppose that the cost of renting a vehicle falls back down to $100 per day, but, due to extremely congested freeways, an additional vehicle would only be able to deliver 750 packages per day. What are the MRP and MRC in this situation?

MRP = $_______

MRC = $ _______

Would adding a vehicle under these circumstances increase the firm’s profits?
(Click to select) Yes or No

Explanation / Answer

a) MRP = 1500 packages * 0.10 per package = $150 MRC = $100 MRP > MRC, yes they should add a delivery vehicle b) MRP = $150 as before MRC = $200 MRP

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