Areo

ISQA429

Dr. Buddress

Jinqi Zhang

2/1/2014

Case one answers

Question 1: What would the first-year costs be to AML if they purchased the 10 used 20-foot containers? How long would it take to recoup the investment, assuming that the mushroom traffic continued?

Cost category Monthly cost ($U.S.) Annual cost ($U.S.)

Inbound transportation 20,000 240,000

Outbound transportation 10,000 120,000

Maintenance 22,220

Energy 33,330

Total 415,550

Revenue category Monthly revenue ($U.S.) Annual revenue ($U.S.)

Mushroom sales 30,000 360,000

Backhaulsa 12,000

Total 372,000

a: based on 120 container shipments per year; 10% of return loads, or 12 containers, would generate revenues equal to the associated costs

According to the above data, the proposed service is a money loser and the relevant investment ($255,530 in U.S.currency) cannot be recouped. Investment costs are as follows: 10 containers @ 7 lakh = 70 lakh; re-equipping of 5 flatcars @ 9 lakh = 45 lakh, for a total investment of 115 lakh. Multiplying 115 lakh times $2,222 per lakh = $255,530.

Question 2: What would the first-year costs be to AML if they purchased 5 new 40-foot containers? How long would it take to recoup the investment, assuming that the mushroom traffic continued?

Cost category Monthly cost ($U.S.) Annual cost ($U.S.)

Inbound transportation 15,500 186,000

Outbound transportation 7,750 93,000

Maintenance 0

Energy 33,330

Total 312,330

Revenue category Monthly revenue ($U.S.) Annual revenue ($U.S.)

Mushroom sales 30,000 360,000

Backhaulsa 9,300

Total 369,300

a: based on 60 container shipments per year; 10% of return loads, or 6 containers, would generate revenues equal to the associated costs

According to the above data, the proposed service would generate an annual “profit” of $56,970 ($369,300 minus $312,330). The investment in for 5 containers is as follows: 5 containers @ 15 lakh = 75 lakh, plus 5 re-equipped flatcars @ 9 lakh = 45 lakh, for a...