A company would like to calculate a? cost-to-cost trade-off analysis for the fol

Question

A company would like to calculate a? cost-to-cost trade-off analysis for the following? scenario:

Cost to ship by rail =?$0.088 per unit per kilometer shipped

Cost to ship by truck =?$0.122 per unit per kilometer shipped

Number of units to be shipped= 111,000

Cost of delay due to slower shipping time if rail is used ?= $10,500

Provide a? cost-to-cost trade-off calculation for the? rail-versus-truck alternative.

Based on the? cost-to-cost trade-off? calculations, the company should ship by ___ at a total cost? (including any delay? costs, where? applicable) of

?$ ?

Explanation / Answer

If ship by using Rail:

Cost=(0.088*111000)+10500=$20,268

Note:Cost of delay to be incurred if ship by rail so it is added above.

If ship by Truck:

Cost=0.122*111000=$13,542

Note: here no delay cost added as it will be reached on time.

If we compare costs of rail v/s truck here shipping by truck is cheaper as compared to rail. so we should ship by using truck having cost of $13,542. it results into saving of cost $(20268-13542=6726).

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