Eastern Talon Transport Relocation Analysis: The Concepts of Relevant Costing

Case Study 1 Report

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Executive Summary

Companies always strive to create value for their customers. In the Canadian trucking industry, over $30 billion in revenues were generated by for-hire companies such as Eastern Talon Transport and to attain a sizeable share of these revenues, it must also strive to create value for it’s customers. In 2004, value is more important than ever. Trade activity between Canada and the United States declined and has resulted in a 1% decline in revenues. With rising costs of fuel and insurance, profitability within the industry begins to slide. Both of these factors
It is believed that all senior dispatchers with more than 10 years experience will exercise their right to displace staff with less experience in another department and in this case, the sales department. It is also believed that only 60% of dispatchers with less than 10 years of experience, or 9 out of 15 junior dispatchers, would opt to move locations to Mississauga. Including 3 managers that would move to Mississauga, moving incentives would amount to $570,000.

This scenario would also directly result in the lay off of 27 sales representatives (24 junior and 3 senior) and 9 dispatchers (6 junior and 3 senior). 2 managers would also be laid off since their role would no longer be needed in Mississauga. $150,000 in contributions would be made, and in addition to $900,000 in severance packages, the total cost to lay-off the necessary staff would amount to $1,050,000.

Considering 35 dispatchers would be required if operations are moved to Mississauga, 27 additional staff would need to be hired to account for the senior dispatchers that have moved to the Sales department. Both new employees, as well as senior dispatchers that have moved, would require training at $750/week for 4 weeks and 2