Your company purchases approximately 100,000 gallons of diesel fuel each month in the Perrysburg market. Chains A, B, and C have each sent you a contract in hopes of winning your company's business. The contract proposals are listed below. BIDS SUPPLIER A B C METHOD Cost plus Retail minus Best of RETAIL DISCOUNT 0.03 0.02 PUMP FEE 0.02 0.03 TRANSACTION FEE 0.25 0.00 0.50 As discussed in this chapter, the price of the cost-plus method is given by the truck stop cost plus pump fee, while that of the retail-minus method is given by the retail price (without state tax) minus retail discount. There is also a transaction fee associated with purchasing fuel from each of the vendors. This is a one-time cost per transaction, meaning that your trucks must pay this cost every time they buy fuel, regardless of the amount of fuel purchased. The average fuel purchase quantity of your drivers (per transaction or per refueling stop) is roughly 100 gallons. CASE QUESTIONS 1. Given the proposed contracts, what is your company's average cost of fuel per gallon with each of the fuel vendors? 2. Which truck stop chain should you choose if your goal is to minimize fuel cost? 3. Chain B really wants your business and says they will do anything to obtain it. What should their retail discount be in order to obtain your business?
Your company purchases approximately 100,000 gallons of diesel fuel each month in the Perrysburg market. Chains A, B, and C have each sent you a contract in hopes of winning your company's business. The contract proposals are listed below. BIDS SUPPLIER A B C METHOD Cost plus Retail minus Best of RETAIL DISCOUNT 0.03 0.02 PUMP FEE 0.02 0.03 TRANSACTION FEE 0.25 0.00 0.50 As discussed in this chapter, the price of the cost-plus method is given by the truck stop cost plus pump fee, while that of the retail-minus method is given by the retail price (without state tax) minus retail discount. There is also a transaction fee associated with purchasing fuel from each of the vendors. This is a one-time cost per transaction, meaning that your trucks must pay this cost every time they buy fuel, regardless of the amount of fuel purchased. The average fuel purchase quantity of your drivers (per transaction or per refueling stop) is roughly 100 gallons. CASE QUESTIONS 1. Given the proposed contracts, what is your company's average cost of fuel per gallon with each of the fuel vendors? 2. Which truck stop chain should you choose if your goal is to minimize fuel cost? 3. Chain B really wants your business and says they will do anything to obtain it. What should their retail discount be in order to obtain your business?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Transcribed Image Text:PTER 5
Your company purchases approximately 100,000 gallons of diesel fuel each month in the
Perrysburg market. Chains A, B, and C have each sent you a contract in hopes of winning
your company's business. The contract proposals are listed below.
BIDS
SUPPLIER
A
B
с
METHOD
Cost plus
Retail minus
Best of
RETAIL DISCOUNT
0.03
0.02
PUMP FEE
0.02
0.03
TRANSACTION FEE
0.25
0.00
0.50
As discussed in this chapter, the price of the cost-plus method is given by the truck
stop cost plus pump fee, while that of the retail-minus method is given by the retail price
(without state tax) minus retail discount. There is also a transaction fee associated with
purchasing fuel from each of the vendors. This is a one-time cost per transaction, meaning
that your trucks must pay this cost every time they buy fuel, regardless of the amount of
fuel purchased. The average fuel purchase quantity of your drivers (per transaction or per
refueling stop) is roughly 100 gallons.
CASE QUESTIONS
1. Given the proposed contracts, what is your company's average cost of fuel per gallon
with each of the fuel vendors?
2. Which truck stop chain should you choose if your goal is to minimize fuel cost?
3. Chain B really wants your business and says they will do anything to obtain it. What
should their retail discount be in order to obtain your business?
Transcribed Image Text:CASE 5-2
Cyclone Transportation
Cyclone Transportation is a medium-sized truckload carrier based in Ohio, United States.
You are a procurement manager of this company, whose main responsibility is the procure-
ment of diesel fuel for the company's fleet of Class 8 trucks.
You have been assigned to negotiate the fuel contract for the Perrysburg, Ohio market.
Your assistant has collected the following per gallon information concerning the major truck
stop chains (A, B, and C) around that area. You will use this information to analyze each fuel
vendor's proposed contract.
DATE
10/20/17
10/21/17
10/22/17
10/23/17
10/24/17
Date
10/20/17
10/21/17
10/22/17
10/23/17
10/24/17
Date
10/20/17
10/21/17
10/22/17
10/23/17
10/24/17
CHAIN A
RETAIL PRICE
(INCL. STATE TAX)
2.822
2.810
2.938
2.958
2.927
Retail price
(incl. state tax)
2.956
2.844
2.794
2.982
2.802
Retail price
(incl. state tax).
2.972
2.946
2.922
2.831
2.846
RETAIL PRICE
(NO STATE TAX)
2.568
2.557
2.674
2.692
2.664
CHAIN B
CHAIN C
Retail price
(no state tax)
2.705
2.681
2.659
2.576
2.590
Retail price
(no state tax)
2.690
2.588
2.543
2.714
2.550
M
TRUCK STOP COST
(NO STATE TAX)
2.514
2.421
2.460
2.738
2.570
Truck stop cost
(no state tax)
2.475
2.557
2.606
2.439
2.550
Truck stop cost
(no state tax)
2.618
2.362
2.466
2.516
2.353
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