Over-land Trucking and Freight: Relevant Costs for Decision Making

Abstract

Over-land trucking and freight has a long-established and mutually beneficial business relationship with a major international automotive parts company, FHP Technologies. Management at FHP has approached Over-land with a request to provide additional routes that are important to the efficiency of its supply chain. Over-land’s management wishes to nurture the business relationship with FHP but is concerned about the available capacity to service the new routes, potential risks, and profitability associated with FHP’s request.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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Resources

Exhibit 1: Income from Operations

(All financial information in the case has been scaled and disguised for educational purposes.)

Over-land Trucking and Freight Income from Operations For the year ending December 31, 2013

Revenue

FYE 12/31/2013

Per Mile

Line Haul

$20,925,280

$1.86

Fuel Surcharge

4,950,160

0.44

Miscellaneous

450,120

0.04

      Total Revenue

$26,325,570

$2.34

Variable Expenses

Insurance

675,120

0.06

Fuel

8,775,190

0.78

Oil Lubricants

112,700

0.01

Tolls

112,550

0.01

Parts and Small Tools

787,630

0.07

Hourly Wages: Drivers

4,950,160

0.44

Trailer Pool Expense

255,120

0.02

      Total Variable

15,638,480

1.39

Fixed Expenses

Insurance

      General Liability

112,620

0.01

      Physical Damage

225,010

0.02

      Workers Compensation

226,000

0.02

      Health Insurance

224,500

0.02

Security

111,750

0.01

Depreciation

2,137,500

0.19

Salaries, Benefits (Garage)

675,000

0.06

Salaries, Benefits (Office)

1,012,520

0.09

Bad Debt Expense

113,500

0.01

Permits

111,520

0.01

Rental Equipment

1,013,000

0.09

Payroll Taxes

562,500

0.05

Accounting Fees, Supplies, Computer Maintenance

112,350

0.01

Miscellaneous

337,510

0.03

      Total Variable

6,975,280

0.62

Income from Operations

$3,681,810

$0.33

Note: Per-mile values are based on 11,250,000 miles and have been rounded to two decimal places.

Exhibit 2: Over-land Balance Sheet

Over-land Trucking and Freight Balance Sheet

For the year ending December 31, 2013

Assets

Current Assets

      Cash

$200,000

      Accounts Receivable

300.000

Total

$500,000

Property Plant and Equipment

      Land

1,000,000

      Buildings

3,000,000

      Accumulated Depreciation Buildings

(1,250,000)

      Tractors, Trailers, and Equipment

18,650,000

      Accumulated Depreciation

(4,750,000)

Total

$16,650,000

Total Assets

$17,150,000

Liabilities and Equity

Current Liabilities

      Accounts Payable

150,000

      Taxes Payable

65,000

      Current Portion of Long-Term Debt

35 000

Total Current Liabilities

$250,000

Long-Term Liabilities

      Notes Payable

1,865,000

Total Long-Term Liabilities

$1,865,000

Total Liabilities

$2,115,000

Owner’s Equity

      Contributed Capital

3,550,000

      Retained Earnings

11,485,000

Total Owner’s Equity

$15,035,000

Total Liabilities and Owner’s Equity

$17,150,000

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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