A manager must make a decision on shipping. There are two shippers, A and B. Bot
ID: 335313 • Letter: A
Question
A manager must make a decision on shipping. There are two shippers, A and B. Both offer a two-day rate: A for $530 and B for $521. In addition, A offers a three-day rate of $466 and a nine-day rate of $417, and B offers a four-day rate of $459 and a seven-day rate of $432. Annual holding costs are 37 percent of unit price. Three hundred and twenty boxes are to be shipped, and each box has a price of $154. Which shipping alternative would you recommend? (Round your intermediate calculations to 3 decimal places and final answers to 2 decimal places. Omit the "$" sign in your response.)
Please show all work!
A manager must make a decision on shipping. There are two shippers, A and B. Both offer a two-day rate: A for $530 and B for $521. In addition, A offers a three-day rate of $466 and a nine-day rate of $417, and B offers a four-day rate of $459 and a seven-day rate of $432. Annual holding costs are 37 percent of unit price. Three hundred and twenty boxes are to be shipped, and each box has a price of $154. Which shipping alternative would you recommend? (Round your intermediate calculations to 3 decimal places and final answers to 2 decimal places. Omit the "$" sign in your response.)
Please show all work!
Cost Option 2 days 4 days 7 days Cost Option 2 days 3 days 9 daysExplanation / Answer
Annual inventory carrying cost of all the boxes
= 37 percent of ( 320 boxes x $154 / box )
= 0.37 x 320 x 154
= $ 18233.60
Therefore . daily inventory carrying cost = $18233.60 / 365 = $49.95
Total cost for any option = Shipping rate + Daily inventory carrying cost x applicable number of days the shipping rate is valid for
Therefore ,
Total cost of 2 days rate offered by A = $530 + $49.95 X 2 = $530 + $99.9 = $629.90
Total cost of 2 days rate offered by B = $521 + $49.95 x 2 = $521 + $99.9 = $620.90
Total cost of 3 days rate offered by A = $466 + $49.95 x 3 = $466 + $149.85 = $615.85
Total cost of 9 days rate offered by A = $417 + $49.95 x 9 = $417 + $449.55 = $866.55
Total cost of 4 days rate offered by B = $459 + $ 49.95 x 4= $459 + $199.8 = $658.8
Total cost of 7 days rate offered by B = $432 + $49.95 x 7 = $432 + $349.65 =$781.65
A
B
Option ( days)
Cost ( $ )
Option ( days )
Cost ( $ )
2
629.90
2
620.90
3
615.85
4
658.80
9
866.55
7
781.65
Since 3 days shipping rate offered by A is the least cost option, would recommend the same
A
B
Option ( days)
Cost ( $ )
Option ( days )
Cost ( $ )
2
629.90
2
620.90
3
615.85
4
658.80
9
866.55
7
781.65
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