Two manufacturing firms, located in cities 90 miles apart. both send their trucks four times a week to the other city full of cargo and return empty. each driver costs $275 per day with benefits (the round trip takes all day) and each firm has truck operating costs of $1.20 a mile.

a) how much each firm could save weekly if each sent its truck twice a week and hauled the other firm’s cargo on the return trip?
b) what would the savings be if there was a $0.20 per mile emission tax on all business truck travel?

Explanation:

Single trip Truck Operating Cost = Distance \times Per mile Cost = 90×1.2 = 108

Single Round Trip Truck Cost Operating Cost = Single Trip Truck Operating Cost  \times 2 = 108×2 = 216

Since, Single Round Truck trip takes 1 day and driver cost given in days, we can calculate the total cost by the following formula:

Single Round Truck Trip Total Cost = Single Round Trip Truck Cost Operating Cost + Driver Salary = 216 +275 = 491

Weekly Transportation cost to each manufacturing firm = No of Round Trip \times Round Trip Cost = 4×491 = 1964

Now, if each manufacturer send its truck twice a week and hauled the other firm's cargo on the return trip, then

New Weekly Transportation cost to each manufacturing firm = 2 \times Round Trip Cost = 2 × 491 = 982

So, Weekly saving = 1964 - 982 = 982

answer; ///(d); determining who competes most closely   with whom evaluating whether industry driving forces and competitive pressure favor some strategic groups and hurt others, and ascertaining whether the profit potential of different strategic groups varies due to the strengths and weaknesses in each groups respective market positions;

answer; conceptual skills;