Richard\'s Sporting Goods needs to fill an online order for 166 hockey sticks. T

Question

Richard's Sporting Goods needs to fill an online order for 166 hockey sticks. The manager is considering shipping the order by truck to the customer in Wisconsin, at a carrier charge of $110. The delivery will take five days and the order is paid on delivery (Richard's doesn't get paid until the sticks are received). The hockey sticks are valued at $90 for each stick and Richard's uses a 20 percent annual inventory carrying charge. a. What will be the total shipping and transit inventory cost of the shipment? (Use 365 days in a year. Do not round intermediate calculations. Round your answers to 2 decimal places.) Transit inventory cost Total cost b-1,.If the shipment could be delivered in only 2 days at a cost of $160, then what will be th total shipment cost? (Usoe 365 days in a year Do not round Intermediate calculations. Round your answer to 2 decimal places) If the manager chose the above option, how much money would be saved or lost? (Round your answer to 2 decimal places.)

Explanation / Answer

a) Total cost = In-transit inventory holding cost + Carrier Cost

= ((5days/365days) x166 sticks x $90 x 20%) + $110

=$150.93

b1

(2/365) x166 sticks x $90 x 20%) + $160 = $176.37

b2

Total cost = In-transit inventory holding cost + Carrier Cost

The 2-day shipment is more expensive than the 5-day shipment.

If the manager chose this option, the company would lose $25.44

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