Acme frozen foods cpu analysis

Assignment Help Mathematics

Reference no: EM13669447

ACME Frozen Foods - CPU Analysis
Acme Frozen Foods, a manufacturer of frozen entrees, currently delivers to C&S York, PA from their facility in Easton, PA. ES3 transportation needs to determine if it would be profitable to set up a customer pick-up arrangement, and is considering use of either the York store delivery fleet or 3rd party carriers.
If the parties can come to a CPU agreement, Acme would continue to offer delivered pricing of its product, and would compensate C&S with a customer pick-up allowance to cover transportation cost. The customer pickup allowance should represent their total cost to deliver.
Please review the data below to determine the action that should be taken.

Vendor base CPU allowance is 1.83/cwt.
Vendor uses a variable fsc schedule that currently pays .61/mile (105.7 miles from Easton to York).
Weights of last 10 orders (All are full TL. Weights vary, based on product mix.):
36,451 lbs
41,000 lbs
29,654 lbs
30,555 lbs
37,140 lbs
38,741 lbs
38,222 lbs
37,299 lbs
31,050 lbs
27,656 lbs

Origin location: Easton, PA 18044
Destination: York, PA 17406
Acme facility operates M-F 6am-6pm; Drop lot available 24/7
Volume 4 loads per week
Average unloading cost - $200
**3 Quotes from 2 contract carriers and 1 broker (fuel surcharge cost would be $52 for all 3):

o Mr. Asset, Inc. - $531
o I Own Trucks, Inc. - $575
o Almost Honest Freight Brokerage, LLC - $475
• York Fleet has frozen deliveries with final stops on a daily basis at one of the following locations(Mileage segments shown in Appendix A) :
o Allentown, PA
o New Hope, PA
o Perkasie, PA
• Total variable fleet cost is $1.46/mile with a $22 stop charge. There is an additional $170 fleet cost that covers reefer fuel and R&M.

Please answer the following:

1. Would a CPU arrangement be profitable for C&S?
2. If so, what is the most cost effective way to execute, and what is the profitability? (Please show all math used to develop conclusion).
3. Should we request that ACME provide a higher CPU allowance?
a. Why or why not?
b. If yes, what per cwt CPU rate should we request and why?

Glossary:
CPU - Customer Pick-up
Cwt - hundred weight (total weight/100)
R&M - Repair and Maintenance

Appendix A:
Allentown, PA to York, PA - 84.9 miles
Allentown, PA to Easton, PA - 18 miles
Easton, PA to York, PA - 105.7 miles
New Hope, PA to York, PA - 113.8 miles
New Hope, PA to Easton, PA - 42.4 miles
Perkasie, PA to York, PA - 99.1 miles
Perkasie, PA to Easton, PA - 38.2 miles

**Please assume the carrier quotes received are representative of the current market.

Reference no: EM13669447

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