Management Accounting Case Book

Over-land Trucking and Freight: Relevant Costs for Decision Making

Thomas L. Albright, Naval Postgraduate School; Paul Juras, Babson College; and Russ Elrod Arab Cartage and Express Co.

 

OVER-LAND TRUCKING AND FREIGHT HAS A long-established and mutually beneficial business relationship with a major international automotive parts company, FHP Technologies. Management at FHP has approached Over-land with a request to provide additional routes that are important to the efficiency of its supply chain. Over-land’s management wishes to nurture the business relationship with FHP but is concerned about the available capacity to service the new routes, potential risks, and profitability associated with FHP’s request.

The case is suitable for an introductory managerial accounting course at both the undergraduate and graduate levels. It is designed to be used to reinforce the concepts of cost behavior and cost-volume-profit (CVP) analysis and to introduce the concept of capacity.

Keywords: cost behavior, breakeven, point of indifference, relevant costing, capacity.

Over-land Trucking and Freight: Relevant Costs for Decision Making^*

Thomas L. AlbrightNaval Postgraduate School

Paul JurasBabson College

Russ ElrodArab Cartage and Express Co.

ABSTRACT

Over-land Trucking and Freight has a long-established and mutually beneficial business relationship with a major international automotive parts company, FHP Technologies. Management at FHP has approached Over-land with a request to ...