TG Industries is considering investing in a fleet of six delivery vehicles. The annual running costs are expected to total $90,000 per vehicle, including the driver's salary. The vehicles are expected to operate for a total of five years. At present TG Industries uses a commercial carrier for its deliveries. The commercial carrier is expected to charge a total of $400,000 for each of the next five years to make the deliveries. What is the estimated net annual cash cost saving on delivery vehicle running costs if TG Industries invests in the fleet of six vehicles?

Question

Quizplus · Accepted Answer

The annual running cost for six vehicles is $90,000 x 6 = $540,000. The commercial carrier charges $400,000 annually. The net annual cash cost saving is $400,000 - $540,000 = -$140,000, indicating an increase in costs, not a saving.

TG Industries Is Considering Investing in a Fleet of Six