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Please Help

Hello everyone I have a test that I have to do in order to get an interview for a job, one of the questions in the test is:

The client with whom you have been working has asked you to put together a savings estimate for 2005 based on the three cost savings opportunities that you have proposed.

Base information: The over-the-road transportation spend is estimated today at $100 million per year. The volume split between less-than-truckload (LTL) and truckload (TL) is fifty-fifty. The LTL shipping mode is typically 18% more expensive than the TL shipping mode.


Initiative A: Can be implemented on 4/1/05 and will result in a 10% reduction in cost on the LTL shipping mode.


Initiative B: Can be implemented on 7/1/05 and will convert 20% of the volume currently being shipped via LTL into TL shipments.


Initiative C: Can be implemented on 10/1/05 and will result in a 12% reduction in the cost of TL shipments but would cause a 4% increase in the cost of LTL shipments.


Question 1: Assuming the client implements all three initiatives, what is the total projected savings for 2005 and how much is attributed to each initiative?


Question 2: The company has a cost of implementation for each initiative of $500,000 some of which is your consulting fees. Which initiatives do you recommend that they implement and why?

Question 3: If the company only has $1 MM to spend this year on these consulting initiatives, would your answer to question 2 be different? Why?
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Any help will be much appreciated.

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