# You are the owner/operator of a small transportation enterprise. Your only semi-tractor, a 2011…

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**OSCM Assignment 1 – Big Rig Buy**

You are the owner/operator of a small transportation enterprise. Your only semi-tractor, a 2011 White Freightliner in service for 3,160,888 miles, needs to be replaced. Downtime is reducing revenues, customer service is negatively impacted, and repair costs are mounting. You are evaluating two new tractors. The 2011 tractor will become a lawn ornament at a local university.

**Factors:**

Operating hours per day = 22

Operating days per week = 7

Weeks of operation per year = 50

Average miles per hour = 51.8

Projected fuel price per gallon = $3.30

**Tractor A:**

2020 White Freightliner; priced @ $169,000; EPA miles per gallon rating = 5.75; insurance per year = $7,900; routine annual maintenance = $28,000.

**Tractor B:**

2020 Volvo; priced @ $186,000; EPA miles per gallon rating = 6.8; insurance per year = $8,800; routine annual maintenance = $34,000.

Questions to be answered:

1. How many miles per year will the new tractor travel?

2. What are the total operating costs per year for each of the tractors being evaluated, including depreciation based upon 6 years (purchase price/6)?

3. What is the total cost per mile driven for each of the two tractors being evaluated? Calculate cost per mile for only the first year of operation.

4. Make a purchase choice between the 2 new tractors.

**Note:** **Do not factor in discounted cash flow, interest, residual value. Only use the givens. Work answers out to 3 decimals. Show your math.**

20 Points

**DKI Apr 2020 copyright**

**OSCM Assignment 2 – Cost Justification**

Your mission is to determine whether or not to purchase replacement equipment based upon the numbers given below.

Existing Equipment:

- Depreciation Cost Per Year = -0- (fully depreciated)

- Maintenance Cost = $13,000 per year

- Operator Labor = 2 people per shift, $13.50 per hour, 2080 hours worked per person, 2 shifts of operation @ 8 hours each

- Grand Total Overtime Hours = 333 per year

- Employee Benefits = 40% of all wages

- NRG Consumption = $73 per operating day

Note: Overtime hours are paid at a rate of 150% of regular pay for hours over 8 per shift.

Proposed Replacement Equipment:

- Depreciation Cost Per Year of Proposed Equipment = Purchase price of $240,000; economic life of 8 years; straight line

- Maintenance Cost = $12,000 per year

- Operator Labor = 1 person per shift, $13.50 per hour, 2080 hours worked per person, 2 shifts of operation @ 8 hours each

- Grand Total Overtime Hours = -0-

**DKI rev Apr 2020 copyright**

- Employee benefits = 40% of all wages

- NRG Consumption = $31 per operating day

Answer the following:

1. What is the total cost difference, **per year**, for operating the replacement equipment versus the existing equipment?

· Replacement Equipment Annual Cost = $

· Existing Equipment Annual Cost = $

· Difference in Cost per Year = $

2. What other consideration must you give to making the decision to keep or replace existing equipment?

**20 points**

**OSCM Assignment 3 – Medical Claims Staffing **

**Factors:**

15,000,000 claims processed per year

Average time required to process one (1) claim = 13.8 minutes

Schedule: 5 days, 7.5 hour shifts, 1 shift, 49 weeks (use one decimal)

32 square feet required per processor

1 break room required for every 100 workers; 1600 sq. ft. each

1 unisex restroom required per 100 workers; 144 square feet each

Administrative offices require a total of 6000 square feet

**Your assignments**:

1. Calculate the number of workers required each day to process claims; zero absenteeism; round up to closest person.

2. If workers ride-share at two (2) workers per vehicle; how many parking spaces are required for workers?

3. How many break rooms are required; round up?

4. How many rest rooms are required; round up?

5. Calculate the total square footage required for the claims processors, administrative offices, break rooms, restrooms, and 1920 square feet of walk ways.

6. Using a wage of $18.68 per hour, zero overtime, what is the **total annual payroll for all claims processors**?

7. Calculate annual benefits for all claims processors @ 37.8% of payroll.

8. What is the additional cost of a 3.75% increase in combined wages and benefits for 1 year, for all processors?

30 Points

**DKI Apr 2020 copyright**

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