CPIM Practice Exam

Which is less expensive for long-distance line haul of large, bulky loads and why?

1. Rail is less expensive than road because rail does not need to add as much packaging.

2. Road is less expensive than rail because road does not need to add pickup and delivery cost.

3. Rail is less expensive than road because most of rail's operating cost is a fixed cost.

4. Road is less expensive than rail because most of road's operating cost is a variable cost.

The correct answer is: Rail is less expensive than road because most of rail's operating cost is a fixed cost.

Rail is considered less expensive than road for long-distance line haul of large, bulky loads primarily due to the nature of its operating costs, which are largely fixed. This means that, regardless of the volume of goods being transported, rail systems incur similar costs related to infrastructure, maintenance, and vehicle operations. For large and bulky loads, rail is able to capitalize on economies of scale, transporting significant quantities of heavy goods over vast distances with lower incremental costs compared to road transportation. Once the fixed costs of rail infrastructure are covered, the additional costs associated with carrying more loads do not increase as much as they would for road transportation. In contrast, road transport often has higher variable costs associated with fuel, maintenance, and driver wages, which can increase significantly with longer distances and heavier loads. This makes rail more efficient in terms of cost for large shipments, as the fixed nature of rail operations helps keep the costs lower relative to the volume of goods transported. Understanding these cost structures is essential when evaluating transportation options for long-distance logistics, especially when dealing with bulky goods that benefit from rail's capacity and lower per-unit cost over longer distances.