Is it cheaper for a business to move freight by truck or rail? Long-ha

Question

Is it cheaper for a business to move freight by truck or rail? Long-haul shipments of at least 800 kilometers that weigh between 22,500 and 36,000 kilograms are economical to move by either mode. However, special cargo like coal and heavier shipments are only economical to ship by rail, and short-haul shipments are only economical to ship by truck.

The average cost to transport freight by truck varies, ranging from €0.1021 per ton- kilometer (where 1 ton = 1,000 kilograms) for shipments less than 400 kilometers, to €0.0371 per ton-kilometer for shipments more than 800 kilometers. The aggregated average cost for all rail shipments is approximately €0.0108 per ton-kilometer and is €0.0129 per ton-kilometer for intermodal shipments—those involving both trains and trucks. Intermodal shipments use trucking-trailers carried on flatbed railcars, allowing cargo to move between trucks and trains without having to be loaded into different containers.

nayanparikh · Accepted Answer

The question ask only for "maintain" the tracks and machinery, where as in the passage it is maintain and improve. 
Hence it cannot be determined.

Kurtosis · Answer

Hi,

The argument states that the railroads reinvested    approximately    30% of their total revenue on tracks and machinery.

Approximately 30% means that the answer can take any value between 25% and 34%. So we cannot infer the exact percentage. Answer is 'Cannot be Determined'.

alexmicah · Answer

It seems to be all semantics (or word choice) to me. The paragraph talks about the 30% of revenue the railroads contributed to tracks, bridges and tunnels, while the question asks about tracks  and machinery .

GinGMAT · Answer

How confident are you on this? I want to make sure I watch out for this trap in the future if this is in fact the correct rationale for this being "Cannot be Determined" and there is no other reason.

I think this is incorrect because the next sentence does specify "tracks and machinery" when talking about the percent of revenue spent.

GinGMAT · Answer

Yeah I was leaning towards this explanation too. Still seems to be very nit-picky.

282552 · Answer

I made the same mistake. I believe the passage says from year X to Y, where the statement says the machinery from From X to Y.
2 different meanings hence cannot be determined.

SlikRick · Answer

This is a stupid question. What is the difference between "maintain" and "improve"? Can improving the tracks not also be considered a form of maintenance? I don't understand what the GMAT is going for with these questions...

oasis90 · Answer

Folks,

This is a very odd question. Don't worry about it much. The only explanation is "maintain" vs "maintain and improve". Usually IR questions are not this weird. Just make sure you pay attention to detail in general.

sk1007 · Answer

Another question from the same set

Please let me know if anyone is able to figure out how to solve this question.

Thanks in advance.

wnj2025 · Answer

Hi Sk1007,

the answer to this one is as follows:
 
The latter part of the paragraph under the "rail advocate" section states that "shifting 10 percent of the long-distance freight that currently moves only by truck to rail instead would save 4 billion liters of fuel per year". The question is asking for "the total amount of fuel that would be saved in the next 5 years if  half  of the long-haul freight that currently moves by truck were instead moved by train".

So if 10% conversion equals 4 billion saved per year, then 50% conversion (as the question asks for "half") would saved 5x, or 20 billion liters per year, and over 5 years this would constitute 20*5 = 100 billion liters saved in total.

Hope this helps.

leonardBe · Answer

Hey! I'm a bit late but does anybody know why I'm wrong on that last one "Transportation cost per unit of freight?"

Diya52 · Answer

"The average cost to transport freight by truck varies, ranging from €0.1021 per ton-kilometer (where 1 ton = 1,000 kilograms) for shipments less than 400 kilometers, to  €0.0371 per ton-kilometer for shipments more than 800 kilometers . The aggregated average cost for all  rail shipments is approximately €0.0108 per ton-kilometer"

The question asks for cost of shipping 1000 kilometres which is more than 800 kilometres. hence cost per ton-kilometre by truck would be €0.0371 where as shipping by rail would cost €0.0108 per ton-kilometer which is less than the cost by truck hence shipping by rail does have an advantage over shipping by truck. So answer is "yes"

leonardBe · Answer

I have to disagree because the figure given for rail shipment is an aggregated average. Thus, in reality, the actual value for shipping freight using rail shipment for this distance might be more than €0.0371.
This is the reason why I put no and why I cannot figure out what I did wrong on this one

Posted from my mobile device

Diya52 · Answer

The  average cost  to transport freight by truck varies, ranging from  €0.1021 per ton-kilometer  (where 1 ton = 1,000 kilograms) for shipments less than 400 kilometers, to  €0.0371 per ton-kilometer  for shipments more than 800 kilometers. The aggregated  average cost  for all rail shipments is approximately  €0.0108 per ton-kilometer

Both truck and rail costs are given as average cost per unit. how do you calculate that - total cost /total no of units.

What is asked in the question?

Transportation cost per unit of freight - how do you calculate this? total cost /total no of units. Notice we are asked cost per unit which is same as average cost per unit.

P.S. - This is what i thought while answering the question but then again I am no expert.

leonardBe · Answer

What if we consider a scenario where the cost to transport freight by rail for a distance of 1,000km skyrockets and the cost to transport freight by rail for any other distance is substantially less, driving the average to €0.0108 per ton-kilometer? Then the answer would be no for example. So it seems to me that we cannot answer the question using the information provided. This is why I answered no.

I have a hard time understanding what is wrong in my reasoning.

Diya52 · Answer

Read the question again. It has asked specifically for 1000 kilometres for both rail and truck

Posted from my mobile device

gh2021 · Answer

My understanding:

It is mentioned in the passage -
The average cost to transport freight by truck varies, ranging from  €0.1021 per ton-kilometer  (where 1 ton = 1,000 kilograms)  for shipments less than 400 kilometers , to  €0.0371 per ton-kilometer  for shipments  more than 800 kilometers . The aggregated average cost for all rail shipments is approximately  €0.0108 per ton-kilometer and is €0.0129  per ton-kilometer for intermodal shipments

Also, for long distance hauls, rail is preferable over trucks.

So since distance given is 1000 km, truck cost is 0.0371 and rail max cost is 0.0129. So Rail is advantageous.

KarishmaB · Answer

Tricky Question

Question 1.

For each of the following questions about the freight railroad companies mentioned in the tabs, select Can be determined if it can be answered solely on the basis of the information provided. Otherwise, select Cannot be determined.

1. What percentage of their revenue did freight railroad companies spend to maintain tracks and machinery from 1980 to 2009?

From 1980 to 2009, railroads reinvested approximately $325 billion of their own funds - approximately 30 percent of their total revenue - to maintain and improve their tracks and machinery.

These are two different purposes - maintain (bug fix), improve (additional features). 
We know 30% was spent for both together. We do not know how much was spent for "maintain" alone (as asked in the question).

2. On average, do freight railroad companies buy more fuel per year than freight trucking companies do?

Total amount of fuel bought by each per year is not mentioned anywhere.

3. Approximately how much revenue did freight railroad companies take in from 1980 to 2009?

From 1980 to 2009, railroads reinvested approximately $325 billion of their own funds - approximately 30 percent of their total revenue - to maintain and improve their tracks and machinery.

$325 million is about 30% of their revenues in this time. So we can find that their revenue was $1083 million (though we do not need to calculate this).

Question 2.

Based on the information provided, which one of the following best approximates the total amount of fuel that would be saved in the next 5 years if half of the long haul freight that currently moves by truck were instead moved by train?

shifting 10 percent of the long-distance freight that currently moves only by truck to rail instead would save 4 billion liters of fuel per year.

Per year, shifting 10% would save 4 billion litres
Shifting 50% would save 4 *5 = 20 billion litres per year.
In next 5 years, we can save 20*5 = 100 billion litres.

Question 3.

For each of the following factors, select Yes if the information provided indicates that, with respect to that factor, shipping freight 1,000 kilometers by rail has an advantage over shipping freight 1,000 kilometers by truck. Otherwise, select No.

1. Fuel efficiency

Given: Railroads are more fuel efficient than trucks.
It is a generic statement for all distances so will hold for 1000 km distance too. 
Yes.

2. Total machinery maintenance costs

We have no idea about the cost of maintenance of machinery of trucks at all. So ignore. 
No.

3.Transportation cost per unit of freight

Given:
 1000 km is a long haul shipment. 
The average cost to transport freight by truck is €0.0371 per ton-kilometer for shipments more than 800 kilometers. The aggregated average cost for all rail shipments is approximately €0.0108 per ton-kilometer.
... short-haul shipments are only economical to ship by truck.

This means that average cost for rail for short distances must be higher than that of truck. But since the average for rail is much lower (0.0108) it means that the long distance cost for rail would be even lower than 0.0108.
Hence the data certainly indicates that this cost is lower for rails compared with trucks.

Yes.

BettyD · Answer

1) What percentage of their revenue did freight railroad companies spend to maintain tracks and machinery from 1980 to 2009?  Cannot be determined . Although the passage states that  railroads reinvested approximately 30 percent of their total revenue on maintaining and improving their tracks and machinery , it doesn't specify the exact percentage spent  solely on maintenance . The term "maintain and improve" could imply different allocations for these two activities, and "approximately 30%" means the exact figure could vary within a range, making it impossible to determine the precise percentage for maintenance alone.

2)On average, do freight railroad companies buy more fuel per year than freight trucking companies do?

Cannot be determined . The passage does mention that  railroads are more fuel-efficient than trucks  and gives an example of potential fuel savings, but it does not provide any data on the actual amount of fuel purchased by either railroads or trucking companies. Without specific figures, we cannot determine which type of company buys more fuel.

3)Approximately how much revenue did freight railroad companies take in from 1980 to 2009?

Can be determined . The passage provides enough information to estimate the total revenue. It states that railroads reinvested approximately $325 billion, which was approximately 30 percent of their total revenue. Using this information, we can calculate the total revenue: $325billion​ / 0.3 = $1,083 billion

Is it cheaper for a business to move freight by truck or rail? Long-ha

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Can be determined	Cannot be determined
		What percentage of their revenue did freight railroad companies spend to maintain tracks and machinery from 1980 to 2009?
		On average, do freight railroad companies buy more fuel per year than freight trucking companies do?
		Approximately how much revenue did freight railroad companies take in from 1980 to 2009?

	4 billion liters
	9 billion liters
	20 billion liters
	25 billion liters
	100 billion liters

Yes	No
		Fuel efficiency
		Total machinery maintenance costs
		Transportation cost per unit of freight

GMAT Multi-Source Reasoning (MSR) Questions

Is it cheaper for a business to move freight by truck or rail? Long-ha

Prep Toolkit

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