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case 3 Relevant costs – Overland Trucking and Freight_CS.pdf

    case 3 Relevant costs – Overland Trucking and Freight_CS.pdf600words6.a. Why might Over-land use an independent operator if the variable cost per mile is higher than if the company had purchased a rig and hired a driver?b. At what point would management be indifferent between the scenarios illustrated in questions 4 and 5? Based on your analysis, would you recommend adding capacity by purchasing an additional rig or by utilizing the services of an independent contractor? Why?7. The case references J. B. Hunt and Landstar as two publicly traded companies that have two very different cost structures. This is true because the companies practice two different philosophies for using (or not using) owner operators (e.g., independent contractors). Speculate about the company that may produce higher profits in periods of high economic demand. Why? Speculate about the company that may have a less risky cost structure in poor economic times. Why?8. All organizations have the potential to perform work, which is determined by the types of resources and the organization’s capacity. Effective use of resources can be critical to a firm in any competitive market. In their efforts to efficiently use capacity, managers may ask questions such as: What portion of the available capacity is in use? Of the capacity in use, what portion is used productively? How can we increase the productive use of capacity? Why is a portion of available capacity not in use? Can we eliminate unused capacity? Over-land’s management is no different. In fact, management is not exactly clear about how to view capacity. Discuss the challenges that Over-land’s management faces with defining and managing capacity. Consider various definitions of capacity, such as theoretical, practical, normal, and actual capacity. Based on the facts presented in the case, prepare an estimate of capacity for Over-land (assuming one driver per rig without slip seating or team driving)

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