General Education

McTavish Transportation loads Intermodal containers onto railcars

ADM 2341– Summer 2020

Assignment 9 – Relevant Costing

 

Your assignment submission must be typed up in either Word or Excel and uploaded (one file only) to the Brightspace assignment drop-box before midnight Friday July 24.

 

QUESTION 1

McTavish Transportation loads Intermodal containers onto railcars. Each railcar can accommodate a maximum size load of 60 feet long x 8 feet wide x 8 feet high. McTavish only loads three sized of intermodal containers:

 

Short

Standard

Long

Container size (L x W x H) (in feet)

10 x 8 x 8

20 x 8 x 8

60 x 8 x 8

Price charged to customer:

$ 520

$ 900

$ 2,100

Variable cost per container

280

300

400

 

McTavish currently has space available on 10,000 railcars. No additional railcars are available.

 

Fixed costs related to loading the railcars is $80,000. This is allocated at $8 per foot of length. (For example, a Short container would be allocated $80 in fixed costs)

 

Various customers have the following containers to be loaded. Total demand is as follows:

Short: 36,000 containers

Standard: 18,000 containers

Long: 3,000 containers

 

McTavish can pick and choose which containers are loaded and which customers to accept.

 

Required

 

How many rail cars would be required to satisfy all of the current demand?

 

How many of each container type should McTavish load?

 

Question 2

 

Pembroke Furniture manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $80 per table, consisting of 70% variable costs and 30% fixed costs, based on a current production level of 15,000. Total capacity is 16,000. The current selling price is $100 per unit.

 

The company just received a special order for 2,000 tables. This special order will be delivered to the customer as a single delivery, and will require extra shipping and storage costs of $50,000. As well, packaging costs will be reduced by $6/unit for the special order.

 

Required

 

What is the minimum selling price they should accept for this special order?

 

Besides costs, briefly describe what other considerations should be included in accepting or rejecting this special order.

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