Richard’s Sporting Goods needs to fill an online order for 188 hockey sticks. Th

Question

Richard’s Sporting Goods needs to fill an online order for 188 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 ten 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 15 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.)

b-1. If the shipment could be delivered in only 2 days at a cost of $175, then what will be the total shipment cost? (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places.)

b-2. 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

= ((10days/365days) x188 sticks x $90 x 15%) + $110

=$179.53

b1

(2/365) x188 sticks x $90 x 15%) + $175 = $188.90

b2

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

The 2-day shipment is more expensive than the 10-day shipment.

If the manager chose this option, the company would lose $9.37

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