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adriana Perez

on 23 July 2013

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CASE 3-3

-Reep Construction is doing site preparation for a new rest area
-When preparing, they estimated it would take four months to perform the work
-Also 10,12,14 and 8 trucks would be needed in months 1 through 4
-The firm already has 20 trucks leased with PennState leasing but they are being used on other projects
-They believe that one truck will be available in month 1, two trucks in month 2, three trucks in month 3, and one truck in month 4
-The leasing contract with PennState has a monthly cost of $600 per truck
-Truck drivers receive $20 per hour
-Fuel costs are approx. $100 per truck a day
-All maintenance costs are paid by PennState short term leasing
-Reep Construction learned that they can obtain short term leases 1 to 4 months
-Short term leasing plans include both the cost of a truck and a driver

- Reep Construction would like to acquire a lease that would minimize cost of meeting the monthly trucking requirements
-Without having to lay off employees
-They are willing to use own drivers even if costs are higher
Q: The optimal leasing plan
Q: The Costs associated with the optimal leasing plan
-Daily fuel cost approx $100/truck
-Truckers work 8hrs/day, 5days/week,
4 weeks/month
-Cost per month:

Q:The cost for Reep Construction to maintain its current policy of no layoffs
-Reep Construction pays their truckers
- Truckers work 8 hrs/day, 5days/week, 4 weeks/month
-One trucker cost 20(8*5*4)=$3200/month
-Trucks cost $600/month
-Fuel $100/day
-The total per month is $5,800
•1 month = 4,000(1) + 2,000 = 6,000
•2 month= 3,700(2) + 4,000 = 11,400
•3 month = 3,225(3) + 6,000 = 15,675
•4 month = 3,040(4) + 8,000 = 20,160

For Reep Construction to have minimal costs they would need to follow the short-term leasing plan. There is a huge cost difference between the long-term and short-term.
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