Running head: RELEVANT COSTS-OVERLAND TRUCKING AND FREIGHTStudents nameProfessorAffiliationCourseDate1RELEVANT COSTS-OVERLAND TRUCKING AND FREIGHTQuestion 1The most useful costs in determining whether or not to take the offer would be the total variableexpenses and the total revenue generated. This are used to determine the working capital andcalculate the break-even point for the additional loads. They will also be useful in projecting thebenefits that will be accrued from the additional loads. The costs which are not important are thefixed costs because they are to be incurred regardless of the volume of productionQuestion 2Contribution per mile = total revenue per mile total cost per mile2.15 1.39 = 0.76 per milePer year = 0.76 *(1500*2*2*52)=237 120The contribution is significant since it can be owed to cover some of the liabilities owed by thebusinessQuestion 3The implication if they chose to expand; the best would be to use the resources they have. Thiswill mean stretching out on the available resources. The risk involved is that there may be nomore left to cater for any emergencies and the business may fail to meet the expectations of otherclients in favor of FHP. They will get a good reputation from FHP and their relations willstrengthen. The risk in investing in this relationship is that should the contract be revised by FHPthen the investment will become null.2RELEVANT COSTS-OVERLAND TRUCKING AND FREIGHTA decision no ...
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