ABC Waste Disposal, headquartered in the industrial city of Dusseldorf, Germany, operates seven specially-constructed semi-trailers and...

ABC Waste Disposal, headquartered in the industrial city of Dusseldorf, Germany, operates seven specially-constructed semi-trailers and cabs for commercial long-distance hauling of radioactive waste materials. Each truck averages one completed load per week, picking up the radioactive containers from chemical companies and other manufacturers in central Europe. The loads are carefully driven to a government site near Dresden, which until the reunification was a manufacturing center in East Germany. Currently, pickups are made in eight countries: Italy, Germany, Austria, France, Belgium, Netherlands, Denmark, and Poland.
ABC maintains an office in each country's capitol. Staffing includes not only a manager and a secretary at each national office, but a part-time lobbyist/attorney to assist in the many political, cross-cultural, border, and legal issues that arise in the nuclear waste disposal industry.
ABC is seriously considering dropping Italy as source of business. Last year, only 25 truckloads of wastes were handled there. Since textile manufacturers in northern Italy are the primary source of trucking for ABC, the size and revenues from their shipments will determine if it is profitable to retain an office and do business in that country.
To analyze the Italian market, ABC gathers data on last year's shipments and revenues, as shown below. Each of the 25 trucks that were loaded in Italy last year carried between 28 and 48 barrels of waste. The income generated per barrel differed significantly (ranging from 50 to 80 euros, based on the type of radioactive material being loaded and the weight of the barrels to be shipped.
Barrels Probability Revenue Probability
28 0.12 50 euros 0.20
33 0.16 60 euros 0.44
38 0.24 70 euros 0.28
43 0.36 80 euros 0.08
48 0.12
The company decided that if they were to simulate 25 truckloads out of Italy they could determine if it would be profitable to continue to operate there next year. It estimates that each shipment to the Dresden dumpsite costs 900 euros, including driver, gasoline, and truck expenses; other cargo and loading and unloading costs average 120 euros per shipment. In addition, it costs 41,000 euros per year to operate the Italian office, including salaries and indirect overhead costs from the home office in Dusseldorf.
Calculate the Profit based on one replication (25 trips (truckloads) per year) and repeat the simulation for 200 replications.
Will the shipments in Italy next year generate enough revenues to cover ABC' costs there?

Homework Answers

Answer #1


Biales Waste Disposal, GmbH
Each trip out of Italy costs DM 900 for shipment and another DM
120 for loading and unloading. If there are 25 trips, the annual cost
to operate the Italy office is (DM 1,020 x 25 DM 41,000)
DM 66,500. To compute the revenue resulting from these 25 trips,
we develop a simulation model as shown in file P10-Biales.XLS.
For each of the 25 trips, the model simulates the number of barrels
transported and the revenue per barrel.
Based on 200 replications using a one-variable Data Table, it
appears that Biales will lose an average of around DM 8,000 per
year by continuing service to the Italy office.
See file P10-Biales CB.XLS for the simulation model and calculations
using Crystal Ball. Based on 3,000 replications, Biales will
lose an average of DM 8,124 per year by continuing service to the
Italy office.
Buffalo Alkali

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