Suppose you manage a delivery company and you must choose between two transportation methods: (a) truck or (b) train. (a)Trucks: Costs U$ 26,000 upfront. For each mile it runs it costs U$ 2.00 in gas. Maintenance costs U$ 4,000 per year and additional U$ 1.00 per mile run. (b)Train: To lease a container that carries the same volume of orders as the truck it costs U$ 10.000 per year. In addition it costs U$ 4.00 per mile to move orders around. Which method has the lowest cost

Which method has the lowest cost: Train.

Explanation:

From the scenario given between using the truck or train for transportation, the option with the lowest cost happens to be by train despite having high cost per mile for moving the goods.

For example, if the goods is to be moved over 1000 miles, it would cost the truck higher than when the train was used.

For Truck:

Cost of Truck: $26,000

Gas: $2 × 1000 = $2000

Extra: $1 × 1000 = $1000

Total: $29,000

For Train:

Cost: $10,000

Mile cost: $4 × 1000 = $4000

Total: $14,000

Therefore, for every 1000 miles covered, it was cheaper to use the train (lease a container carrier in train) than to use the Truck.