Analyst Case StudyTransportationYou are the Analyst for a small bulk transportation operation located in Houston, TX. Your manager has informed you that ABC Refinery recently sent out a Request for Proposal (RFP) to provide PetCoke transportation services. The volumes are expected to be 1,000,000 tons each year. The product will be transported on a ratable basis during the twelve months of the year; hence, transportation services will need to be provided 24/7, 365 days per year. Your manager has asked you to calculate the transportation rate necessary to achieve an 88% Operating Ratio (Total Expenses / Total Revenue). You have performed a zero-based analysis of the costs for providing these services and have summarized your findings as follows:The current truck yard and maintenance shop is sufficient for the additional equipmentThe current lease payment for the land is $10,000 per monthThe shop has annual depreciation of $36,000 per yearOne-way miles: 15.1Anticipated MPH: 48Time to Load & Unload: 30 minutesTime for Pre/Post Shift Check and Fueling: 45 minutesCost of diesel: $4.05/galMPG: 5.2Tons of PetCoke per Load: 25.50Tire Expense: $.08 per mileParts & Supplies Expense: $0.16 per mileOutside Maintenance Expense: $0.04 per mileDriver Pay: The current market analysis shows the drivers annual wages need to be roughly $55,000 per year. The drivers need to be paid on a per load basis; hence you need to calculate what the pay per load needs to be and reflect this pay structure in your pro forma. Drivers schedule will be 11 hours per day 5 days per weekBonus Pay: 4% of LaborOne mechanic for every six tractors (assume 50 hour work weeks) Mechanic Pay: $24.00 per hourCost of tractor: $105,000Depreciate over 3 yearsSalvage Value: 15% of purchase priceInsurance cost: $260 per month per tractorCost of trailer: $150,000Depreciate over 10 yearsSalvage Value: ZeroInsurance costs: .85% of the total purchase priceSavages CFO has indicated the interest rate will be 5.50% for all capital purchasesOverhead support as follows:Operation Manager: $85,000 (salary)Maintenance Manager: $70,000 (salary)Coordinator: $20 per hour (40 hour work week)Fringe benefit costs will be 38% of wages and salaries (also applies to drivers and maintenance employees)Travel and other manager expenses will cost $500 a month except in June when the costs will be $3,000General Liability Insurance costs will be 1.5% of revenueTelephone and other utilities will be $35,000 per yearOffice and facility supplies, uniforms, and miscellaneous expenses will be $2,500 per monthGeneral overhead costs will be 10% of revenueIgnore taxesPrepare a pro forma for this opportunity as requested by your manager, and calculate the rate per ton needed to generate an 88% operating ratio.
Analyst Case Study
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