2 Determine which shipping alternative would be most economical to ship 80 boxes

Question

2 Determine which shipping alternative would be most economical to ship 80 boxes l parts b each box bas a price of $200 and holding costs are 30 percent of price, given this sh mation; overnight. $300, two-day. $260, six-day. S180 pi A manager niust make a decision on shipping. There are two shippers. A and B. B day rate: A for $500 and B for $525. In addition. A offers a three-day rate of $460 and rate of $400, and B offers a four-day rate of $450 and a seven-day rate of $410. Annualhellio costs are 35 percent of unit price. Three hundred boxes are to be shipped, and each bor heyi of $140. Which shipping alternative would you recommend? Explain.

Explanation / Answer

Solution- Six-day shipping would be most economical.
Given,

Price = $200

Quantity = 80 boxes

Therefore, Holding cost for 80 boxes, H = .30 (80 boxes) ($200 per box) = $4,800 for one year

For one day there would be no holding cost therefore total cost would be overnight shipping charges that is $300.

Two-day analysis:
d = 1 day; Incremental holding cost = H*(d/365)
= $4,800(1/365) = $13.15
Total Cost = $260 + $13.15 = $273.15

Six-day analysis:
d = 5 days; Incremental holding cost = H(d/365)
= $4,800(5/365) = $65.75
Total Cost = 180 + 66.75 = $246.75

Since total cost is lowest for 6 day shipment, 6 day shipment is the most economical.

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.