CLTD Logistics Costing and Finance 2 — Questions and Answers
Question 1: Which financial metric measures how efficiently a company uses its assets to generate logistics-related revenue or cost savings?
- Gross margin percentage
- Return on assets (ROA) (Correct answer)
- Days sales outstanding (DSO)
- Current ratio
Correct answer: Return on assets (ROA)
Return on assets (ROA) indicates how effectively logistics assets (fleet, warehouses, equipment) generate returns, making it a key metric for logistics investment decisions.
Question 2: What is the difference between a 'Class Rate' and a 'Contract Rate' in freight pricing?
- Class rates are negotiated individually; contract rates are published in tariffs
- Class rates are published tariff-based rates tied to commodity classification; contract rates are individually negotiated between shipper and carrier (Correct answer)
- Class rates apply only to air freight; contract rates apply to ocean freight
- There is no practical difference between the two
Correct answer: Class rates are published tariff-based rates tied to commodity classification; contract rates are individually negotiated between shipper and carrier
Class rates are standardized tariff rates based on the NMFC freight class of a commodity; contract rates are privately negotiated between a shipper and carrier, often offering lower prices for volume commitments.
Question 3: A company's logistics cost as a percentage of sales is 8%. If annual sales are $50 million, what are the total logistics costs?
- $400,000
- $4,000,000 (Correct answer)
- $40,000,000
- $8,000,000
Correct answer: $4,000,000
Total logistics costs = 8% × $50,000,000 = $4,000,000.
Question 4: Which concept describes the trade-off where reducing inventory carrying costs may increase transportation costs due to more frequent smaller shipments?
- Economies of scale
- Cost trade-off analysis (Correct answer)
- Pareto analysis
- Net present value analysis
Correct answer: Cost trade-off analysis
Cost trade-off analysis recognizes that minimizing one logistics cost element (e.g., inventory) often increases another (e.g., transport), requiring a total-cost perspective to find the optimal balance.
Question 5: When evaluating a make-or-buy decision for logistics services (e.g., outsourcing warehousing), which cost type is most critical to identify?
- Sunk costs
- Opportunity costs and total incremental costs (Correct answer)
- Historical average costs
- Standard overhead rates
Correct answer: Opportunity costs and total incremental costs
Make-or-buy decisions should focus on opportunity costs and incremental (avoidable) costs rather than sunk or historical costs, to ensure the decision reflects true economic impact.
Question 6: A shipper ships 10,000 lbs at a rate of $0.05 per lb. The carrier offers a 500 lbs minimum charge at $0.08 per lb. What does the shipper actually pay?
- $500 (Correct answer)
- $400
- $800
- $40
Correct answer: $500
The actual charge is 10,000 × $0.05 = $500; the minimum charge would be 500 × $0.08 = $40, which is less, so the actual weight charge of $500 applies.
Question 7: Which of the following best defines 'accessorial charges' in transportation billing?
- The base line-haul rate for moving freight from origin to destination
- Extra fees for services beyond standard pickup and delivery, such as liftgate, residential delivery, or detention (Correct answer)
- Discounts applied for high-volume shippers
- Fuel taxes collected by the government
Correct answer: Extra fees for services beyond standard pickup and delivery, such as liftgate, residential delivery, or detention
Accessorial charges cover additional services or conditions outside standard transport, such as liftgate use, inside delivery, residential surcharges, or detention when a driver waits beyond free time.
CLTD Logistics Costing and Finance 2
Which financial metric measures how efficiently a company uses its assets to generate logistics-related revenue or cost savings?