Question: Company J is a transporter of fruit. They transport goods from A to B (a one way distance of 900 km). In most cases the trucks return empty from B to A. The cost on which the company quotes for business is broken down as follows: Fuel Cost: $1.56 per km Driver Salary: $900 per 1,800 km trip Variable overhead expenses (maintenance, tyres etc): $2.20 per km Allocation of fixed overhead expenses: $1,200 per 1,800 km trip Company J has a fixed term contract with Farm X to transport goods to the harbour every week. Recently a second company, the Fruit Y, asked for a quote from Company J to transport fruit pallets to A from B and packaging material back from A to B for one time only.
1. What would you suggest is the lowest price one way that Company J can charge Farm X?
2. What would you suggest is the lowest price one way that Company J can charge Fruit Y?