Suppose Jones Company has orders from three customers located in the same market

Question

Suppose Jones Company has orders from three customers located in the same market area. One order has a total weight of 4,300 pounds, the second weighs 9,000 pounds, and the third weighs 12,800 pounds. The transportation carrier quotes a freight rate of $18 per hundredweight (or cwt.) for direct shipment to the customer for shipments weighing 1,000 to 4,999 pounds, $16 per cwt. for orders weighing 5,000 to 9,999 pounds, and $14 for shipments weighing between 10,000 and 15,000 pounds. Alternatively, the carrier’s rate for shipments weighing more than 20,000 pounds is $10.00 per cwt. However, if the orders are combined into one consolidated shipment, the carrier will charge $330 for each stop it is required to make. a. Calculate the total cost using separate shipments, and total cost using consolidated shipments

Explanation / Answer

Total Cost using Seperate Shipments

For Order 1- Cost Per hundredweight * Number of hundred weight = 18 * 4300 / 100 = 774

For Order 2- Cost Per hundredweight * Number of hundred weight = 16 * 9000 / 100 = 1440

For Order 3- Cost Per hundredweight * Number of hundred weight = 14 * 12800 / 100 = 1792

For Consolidated Shipment-

Number of Stops to be made = 2 (Only Two Intermediate Stops are considered)

Total Weight of Shipment = 4300+9000+12800 = 26100

Total Cost for consolidated order = Cost Per hundredweight * Number of hundred weight + Number of Stops * Cost per Stops = 10 * 26100 / 100 + 2 * 300 = 32100

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