What speed should the trucks use?
A trucking company is exploring the cost-to-cost trade-offs given the following information:
Fuel cost (diesel): $3.5 per gallon
Distance to be traveled: 700 miles
Mileage at 70 mph: 5 miles per gallon
Mileage at 60 mph: 6 miles per gallon
Cost of delay if delivery commitment is missed: $75.
Cost at 70 mph = (700 miles/5 miles per gallon) × $3.5 per gallon = $490
Cost at 60 mph = $75 + (700 miles/6 miles per gallon) × $3.5 per gallon = $483.33
Difference in cost = $490 - $483.33 = $6.67. Therefore, the slow speed of 60 mph should be used.
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