w David R. Anderson, Dennis J. t x 9 9 C' i https://drive.googlecom/file/d7HBaaW7rhyhm_OR2H622XAHGTZEJ99lP/view * e e 3 SEE Apps Ii 1st place modern...
Hello. I have been trying to find out which leasing plan is the most optimal solution (short term vs long term). I have tried figuring out the formula for long term in which I got 3200 + 700y. However, for question two I included both the short term and "long term" formula in finding the cost associated with the optimal leasing plan. Any help on the three problems will be greatly appreciated. Thank you!
w David R. Anderson, Dennis J. t x 9 9 C‘ i https://drive.googlecom/file/dfl7HBaaW7rhyhm_OR2H622XAHGTZEJ99lP/view * e e 3 SEE Apps Ii 1st place modern m Symbolab Math 5... ‘: My Print Center Vs: The Wall Street Jo... ‘ Grammarly Premi... :' Microsoft Office C... Q mos.exce|.2016.ex... » Case Problem 3 TRUCK LEASING STRATEGYReep Construction recently won a contract for the excavation and site preparation of anew rest area on the Pennsylvania Turnpike. In preparing his bid for the job, Bob Reep,founder and president of Reep Construction, estimated that it would take four months toperform the work and that 10, 12, 14, and 8 trucks would be needed in months 1 through4. respectively. The firm currently has 20 trucks of the type needed to perform the work on the newproject. These trucks were obtained last year when Bob signed a long-term lease withPennState Leasing. Although most of these trucks are currently being used on existingjobs. Bob estimates that one truck will be available for use on the new project in month 1,two trucks will be available in month 2. three trucks will be available in month 3, and onetruck will be available in month 4. Thus, to complete the project, Bob will have to leaseadditional tnicks. The long-term leasing contract with PennState has a monthly cost of $600 per truck.Reep Construction pays its truck drivers $20 an hour, and daily fuel costs are approxi-mately $100 per tmck. All maintenance costs are paid by PennState Leasing. For planningpurposes, Bob estimates that each truck used on the new project will be operating eighthours a day, five days a week for approximately four weeks each month. Bob does not believe that current business conditions justify committing the firm to addi-tional long-term leases. In discussing the short-term leasing possibilities with PennStateLeasing. Bob learned that he can obtain short-tenn leases of 1—4 months. Short-term leasesdiffer from long-tenn leases in that the short-term leasing plans include the cost of both atruck and a driver. Maintenance costs for short-term leases also are paid by PennState Leas-ing. The following costs for each of the four months cover the lease of a truck and driver: Length of Lease Cost per Month ($)1 40002 37003 32254 3040 Bob Reep would like to acquire a lease that would minimize the cost of meeting themonthly trucking requirements for his new project, but he also takes great pride in the factthat his company has never laid off employees. Bob is committed to maintaining hisno-Iayoff policy; that is, he will use his own drivers even if costs are higher.
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