Located in Salt Lake City, since 1948, the Salty Snack Food Company manufactured potato chips and distributed them within a 100-mile radius of Salt Lake City. It used its own trucks for delivery in the Salt Lake-Provo areas and common carrier trucking for all other outgoing shipments. All its motor carrier shipments were on an LTL basis. The applicable motor carrier freight rating, or classification, was high, although potato chips are often given as textbook examples of bulky freight that will cause a truck to cube out. Even after much of the motor carrier industry was deregulated, Salty had difficulty finding contract truckers interested in negotiating specific contract rates. This was because potato chips—because of their bulk, were not a desirable cargo from the truckers' point of view. The potato chips were packed in 8-ounce bags. Twenty-four 8-ounce bags were packed in cartons that were 12 inches by 12 inches by 36 inches. The packed carton weighed 14 pounds. The 8-ounce bags of chips wholesaled FOB plant for 40 cents each and retailed for cents. Recently, the Salty firm acquired rights to produce a new type of chip, made from powdered potatoes, yielding chips of identical shape that could be packed in tubular containers. A 5-ounce paper tube of chips would wholesale (FOB plant) for 40 cents and retail for 59 cents. The new chips were much less bulky: Twenty-four 5-ounce containers could be packed in a carton measuring one cubic foot. The filled carton weighed 10 pounds. (The difference between the weight of chips and that of cartons is due to packaging materials. The carrier is paid based on carton weight.) Salty management believed that because the New chips were less bulky, the LTL classification of 200 was too high. Management decided to ask the motor carrier classification bureau for a new, lower classification. (Motor carrier rates for a movement are the classification multiplied by a distance factor. If the classification were lowered, the rate would be lowered proportionally for all shipments.) QUESTIONS 1. If you worked for Salty, what new classification would You ask for? Give your reason. 2. Classifications are based on both cost and value of service. From the carrier's standpoint, how has cost of service changed? 3. Given the existing LTL classification of 200, how has value of service to the customer changed? 4. The new tubular containers are much sturdier. If you worked for Salty, how—if at all-would you argue that this factor influences classification? 5. You work for the motor carrier classification bureau and notice that the relationship between the weight of potato chips and the weight of packaging has changed. How, if at all, should this influence changes in the product's classification 6. One of Salty's own trucks, used for local deliveries, has two axles and an enclosed body measuring (inside) 7 feet by 8 feet by 20 feet and is limited by law to carrying a load of no more than 8,000 pounds. Because the truck is not supposed to be overloaded, what combinations, expressed in terms of cartons of both new- and old-style chips can it legally carry?

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