Ask Question, Ask an Expert

+61-413 786 465

info@mywordsolution.com

Ask Basic Finance Expert

Keep your response between 2 and 3 pages (double-spaced) in length....not including the associated linear program and sensitivity report you will have to submit in an Excel format.  The score will be primarily dependent on the content and accuracy of your responses to the first three sets of issues mentioned in the "Managerial Report" on Page 306 of your text.  However, part of the evaluative process, will involve the overall professionalism of the write-up itself.  I expect the work to be free of typographical errors and inclusive of the kind of responses you would be expected to provide to a reporting supervisor.

Solutions Plus is an industrial chemicals company that produces specialized cleaning ?uids and solvents for a wide variety of applications. Solutions Plus just received an invitation to submit a bid to supply Great North American railroad with a cleaning ?uid for locomotives. Great North American needs the cleaning ?uid at 11 locations (railway stations); it provided the following information to Solutions Plus regarding the number of gallons of cleaning ?uid required at each location (see Table):

Solutions Plus can produce the cleaning ?uid at its Cincinnati plant for $1.20 per gallon. Even though the Cincinnati location is its only plant, Solutions Plus has negotiated with an industrial chemicals company located in Oakland, California, to produce and ship up to 50,000 gallons of the locomotive cleaning ?uid to selected Solutions Plus customer locations. The Oakland company will charge Solutions Plus $1.65 per gallon to produce the cleaning ?uid, but Solutions Plus thinks that the lower shipping costs from Oakland to some customer locations may offset the added cost to produce the product.

TABLE

Location          Gallons Required        Location          Gallons Required

Santa Ana       22,418                         Glendale          33,689

El Paso            6,800                           Jacksonville     68,486

Pendleton        80,290                         Little Rock      148,586

Houston          100,447                       Bridgeport       111,475

Kansas City     241,570                       Sacramento     112,000

Los Angeles    64,761

TABLE     FREIGHT COST ($ PER GALLON)

                        Cincinnati                                Oakland

Santa Ana                   -                                0.22

El Paso                        0.84                             0.74

Pendleton                    0.83                             0.49

Houston                      0.45                             -

Kansas City                 0.36                             -

Los Angeles                -                                0.22

Glendale                      -                                0.22

Jacksonville                 0.34                             -

Little Rock                  0.34                             -

Bridgeport                   0.34                             -

Sacramento                 -                                0.15

The president of Solutions Plus, Charlie Weaver, contacted several trucking companies to negotiate shipping rates between the two production facilities (Cincinnati and Oakland) and the locations where the railroad locomotives are cleaned. Table 6.9 shows the quotes received in terms of dollars per gallon. The - entries in Table identify shipping routes that will not be considered because of the large distances involved. These quotes for shipping rates are guaranteed for one year.

To submit a bid to the railroad company, Solutions Plus must determine the price per gallon they will charge. Solutions Plus usually sells its cleaning ?uids for 15% more than its cost to produce and deliver the product. For this big contract, however, Fred Roedel, the director of marketing, suggested that maybe the company should consider a smaller pro?t margin. In addition, to ensure that if Solutions Plus wins the bid, they will have adequate capacity to satisfy existing orders as well as accept orders for other new business, the management team decided to limit the number of gallons of the locomotive cleaning ?uid produced in the Cincinnati plant to 500,000 gallons at most.

Managerial Report

You are asked to make recommendations that will help Solutions Plus prepare a bid. Your report should address, but not be limited to, the following issues:

1. If Solutions Plus wins the bid, which production facility (Cincinnati or Oakland) should supply the cleaning ?uid to the locations where the railroad locomotives are cleaned? How much should be shipped from each facility to each location?

2. What is the breakeven point for Solutions Plus? That is, how low can the company go on its bid without losing money?

3. If Solutions Plus wants to use its standard 15% markup, how much should it bid?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M9792222

Have any Question?


Related Questions in Basic Finance

Canadian-based mining company el dorado gold ego suspended

Canadian-based mining company El Dorado Gold (EGO) suspended its dividend in March 2016 as a result of declining gold prices and delays in obtaining permits for its mines in Greece. Suppose you expect EGO to resume payin ...

The satellite shoppe has current sales per share of 840 the

The Satellite Shoppe has current sales per share of $8.40. The sales per share are expected to increase at an annual rate of 12%. The historical P/E ratio is 16.2 and the historical P/S ratio is 7.6. What is the expected ...

Your company is considering a new project that will require

Your Company is considering a new project that will require $18,000 of new equipment at the start of the project. The equipment will have a depreciable life of 5 years and will be depreciated to a book value of $3,000 us ...

Does the agency problem only happen in the relationship

Does the agency problem only happen in the relationship between Employees and Stockholders? How about the relationship between clients and stars?

If someone owns a hair salon what type if any life

If someone owns a hair salon what type if any life insurance should they have if their spouse works at a nuclear plant? How much coverage should the owner have?

Pk software has 76 percent coupon bonds on the market with

PK Software has 7.6 percent coupon bonds on the market with 23 years to maturity. The bonds make semiannual payments and currently sell for 108.25 percent of par. What is the current yield on PK's bonds?  (Do not round i ...

What are the differences between a cash budget and an

What are the differences between a cash budget and an operating budget and Why might both be important to a small business?

You are about to invest some money in a bond fund the

You are about to invest some money in a bond fund. The management fee of the fund is quite low, it only charges a fee of 2%/year on the assets managed. However, you do not believe the bond fund manager has superior abili ...

A firm is considering the two mutually exclusive

A firm is considering the two mutually exclusive investments projects. Project Alpha requires an initial outlay of $600 and will return $160 per year for the next seven years; Project Beta requires an initial outlay of $ ...

Miletus bronze works has an outstanding bond that pays 964

Miletus Bronze Works has an outstanding bond that pays 9.64 percent interest. You are in the 37 percent tax bracket. What is your aftertax yield (in percents) on this bond?

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As