Case 1: Long Haul Trucking Company. “Rick, I am disappointed that the diesel tru
ID: 2471551 • Letter: C
Question
Case 1: Long Haul Trucking Company.
“Rick, I am disappointed that the diesel trucks have not produced the operating savings
we expected. They are very costly to maintain.” Charlie Gore, the Fleet manager for Long
Haul Trucking Company was talking to Rick Sanchez, the purchasing manager for Long
Haul Trucking.
Long Haul Trucking operates a fleet of trucks to deliver merchandise from warehouses
to retailers. A few years ago, faced with rising maintenance and fuel costs, the company
purchased some diesel trucks for its fleet because it had heard that these trucks were
more economical to operate. This is because, on average, diesel fuel is 12 cents per gallon
cheaper than gasoline and the average truck gets 10 miles per gallon. The manager of the
truck fleet, Charlie Gore, however, has been reviewing the repair and maintenance bills for
the trucks and has found that the diesel trucks seem to be more expensive to repair and
maintain than the regular gasoline-powered trucks. He has collected the repair and maintenance
(R&M) expense for this last year on the entire fleet of 20 trucks by their age, miles
driven, and type. The data is summarized in Table 1 on the next page.
“Rick,” said Charlie as he put the data in Table 1 in front of Sanchez, “this data shows
that, on average the 6 diesel trucks cost $21,156 in R&M expense whereas the 14 gasoline
trucks averaged only $13,269 in R&M expense. I am also surprised that simple correlations
show a negative relationship between miles driven and age and between miles driven
and type of truck.” Rick looked up at Charlie and replied, “Charlie can I borrow this data.
I have a young college graduate that I just hired and and she is very bright. Let me ask her to
look at this data and see what she comes up with.”
Required:
Assume that you are an analyst working for Rick Sanchez. He has asked you to analyze
this data and to address the questions below. Prepare a business memo that addresses his
issues.
On average, how much extra does it cost to repair a diesel truck compared to a gasoline
truck?
Table 1
Annual Repair and Maintenance Cost for Trucks
* can you please provide detailed explanation for a better comprehension.
Truck # Expense Miles Years Type 1 21,100 100,625 1 Diesel 2 23,548 108,750 2 Diesel 3 18,560 83,438 2 Diesel 4 19,525 77,500 3 Diesel 5 22,435 88,125 3 Diesel 6 21,768 85,938 3 Diesel 7 10,345 95,625 1 Gas 8 11,575 91,875 1 Gas 9 14,240 98,125 2 Gas 10 13,300 88,438 2 Gas 11 14,105 90,625 2 Gas 12 13,050 81,875 2 Gas 13 17,150 95,625 3 Gas 14 11,230 76,849 2 Gas 15 10,490 92,145 1 Gas 16 16,645 86,940 3 Gas 17 16,219 91,257 3 Gas 18 13,565 85,432 2 Gas 19 9,245 84,688 1 Gas 20 14,600 80,625 3 GasExplanation / Answer
Ans-
Average cost Gas
Total Cost per miles of Gas truck/no. of Gas Truck
As per above analysis,
Year 1 diesel truck has expense of .$21 per mile and GAS truck has expense of .11 or .13 per mile
Year 2 diesel truck has expense of .$22 per mile and GAS truck has expense of .15 or .16 per mile
Year 3 diesel truck has an expense of .$25per mile and GAS truck has an expense of .18 or .19 per mile.
According to the above decision can be taken.
Thank You!!!
Diesel Cost per mile Years 0.21 1 0.22 2 0.22 2 0.25 3 0.25 3 0.25 3 Gas 0.11 1 0.11 1 0.11 1 0.13 1 0.15 2 0.15 2 0.15 2 0.16 2 0.16 2 0.16 2 0.18 3 0.18 3 0.18 3 0.19 3Related Questions
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