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Presentation/PPT
27/08/2022
Analyst Case Study
Transportation
You 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 equipment
The current lease payment for the land is $10,000 per month
The shop has annual depreciation of $36,000 per year
One-way miles: 15.1
Anticipated MPH: 48
Time to Load & Unload: 30 minutes
Time for Pre/Post Shift Check and Fueling: 45 minutes
Cost of diesel: $4.05/gal
MPG: 5.2
Tons of PetCoke per Load: 25.50
Tire Expense: $.08 per mile
Parts & Supplies Expense: $0.16 per mile
Outside Maintenance Expense: $0.04 per mile
Driver 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 week
Bonus Pay: 4% of Labor
One mechanic for every six tractors (assume 50 hour work weeks)
Mechanic Pay: $24.00 per hour
Cost of tractor: $105,000
Depreciate over 3 years
Salvage Value: 15% of purchase price
Insurance cost: $260 per month per tractor
Cost of trailer: $150,000
Depreciate over 10 years
Salvage Value: Zero
Insurance costs: .85% of the total purchase price
Savage’s CFO has indicated the interest rate will be 5.50% for all capital purchases
Overhead 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 $3,000
General Liability Insurance costs will be 1.5% of revenue
Telephone and other utilities will be $35,000 per year
Office and facility supplies, uniforms, and miscellaneous expenses will be $2,500 per month
General overhead costs will be 10% of revenue
Ignore taxes
Prepare a pro forma for this opportunity as requested by your manager, and calculate the rate per ton needed to generate an 88% operating ratio.
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