A Businessman Is Considering Opening a Small Specialized Trucking Firm

question 34

Short Answer

A businessman is considering opening a small specialized trucking firm. To make the firm profitable, it is estimated that it must have a daily trucking capacity of at least 84,000 cu. ft. Two types of trucks are appropriate for the specialized operation. Their characteristics and costs are summarized in the table below. Note that truck 2 requires 3 drivers for long haul trips. There are 41 potential drivers available and there are facilities for at most 40 trucks. The businessman's objective is to minimize the total cost outlay for trucks. $\begin{array}{cccc}&&\text { Capacity } &\text { Drivers }\\\text { Truck }&\text { Cost }& (\mathrm{Cu} . \mathrm{ft}) & \text { Needed } \\\hline \text { Small } & \$ 18,000 & 2,400 & 1 \\\text { Large } & \$ 45,000 & 6,000 & 3\end{array}$ Solve the problem graphically and note there are alternate optimal solutions. Which optimal solution:
a.uses only one type of truck?
b.utilizes the minimum total number of trucks?
c.uses the same number of small and large trucks?

Understand the role and execution of capital budgeting post-audits.

Recognize the impact of income taxes on capital budgeting decisions.

Understand the relevance of the time value of money in financial decision-making.

Identify the methods of depreciation and their impact on capital budgeting.

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Definitions:

Source of Financing

The origin or means through which funds are provided for business activities, projects, or acquisitions.

Spring Beverage Company

Assuming it is a named entity, this would refer to a specific company involved in the production or distribution of beverages associated with the spring season or having 'Spring' in its name.

Enforceable

Capable of being imposed or upheld by law, referring to contracts, agreements, or rules that can be legally compelled.

Essential Terms

The necessary and fundamental conditions included in a contract that are critical to its enforcement and validity.