Problem
The article "A Pioneering Approach to Reducing Fuel Cost and Carbon Emissions from Transportation" recommends using the actual fuel cost a carrier incurs in delivering a shipment rather than the traditional approach which is assessing a fuel surcharge based on Department of Energy average retail diesel fuel prices.
Use the following data for a 710-mile shipment from Council Bluffs, Iowa to Madison, Indiana to answer the questions below. Round all answers to three digits to right of decimal.
A. 710-mile shipment includes 305 miles in Iowa, 220 miles in Illinois, and 185 miles in Indiana
B. U.S. Department of Energy national retail diesel fuel price for week that shipment takes place is $3.380 per gallon
C. U.S. Department of Energy Midwest region retail diesel fuel price for week that shipment takes place is $3.171 per gallon
D. Federal excise tax (user tax) on diesel fuel is $0.243 per gallon
E. Illinois state excise tax on diesel fuel is $0.466 per gallon
F. Indiana state excise tax on diesel fuel is $0.490 per gallon
G. Iowa state excise tax on diesel fuel is $0.325 per gallon
H. Wholesale diesel fuel price (net of all excise taxes) is $2.400 per gallon
I. The carrier pays wholesale price plus 8%
J. The carrier averages 6.7 mpg fuel consumption
1) What is the actual fuel cost for the carrier for this shipment?
2) How much excise (user) tax does the carrier pay to Iowa? to Illinois? to Indiana?
3) How much federal excise (user) tax does the carrier pay?
4) Does the shipper benefit from the carrier using actual cost rather than DOE national average retail price in this case? Explain (with dollar calculations).