Suppose Jones Company has orders from three customers located in the same market
ID: 368042 • Letter: S
Question
Suppose Jones Company has orders from three customers located in the same market area. One order has a total weight of 3,200 pounds, the second weighs 7,900 pounds, and the third weighs 11,700 pounds. The transportation carrier quotes a freight rate of $16 per hundredweight (or cwt.) for direct shipment to the customer for shipments weighing 1,000 to 4,999 pounds, $14 per cwt. for orders weighing 5,000 to 9,999 pounds, and $12 for shipments weighing between 10,000 and 15,000 pounds. Alternatively, the carrier’s rate for shipments weighing more than 20,000 pounds is $8.00 per cwt. However, if the orders are combined into one consolidated shipment, the carrier will charge $220 for each stop it is required to make.
a. Calculate the total cost with or without consolidated shipment charge.
Total cost using separate shipments Total cost using consolidated shipmentExplanation / Answer
a)
The weight of shipment 1 = 3200 pounds . Sinc weight is in bracket of 1000-4999 pounds, the cost is $16 per hundredth cwt.
cost of transportation for shipment 1 = 3200 * 16/100= $512.
The weight of shipment 2 = 7900 pounds . Since weight is in bracket of 5000-9999 pounds, the cost is $14 per hundredth cwt.
cost of transportation for shipment 2 = 7900 * 14/100= $1106.
The weight of shipment 3 = 11700 pounds . Since weight is in bracket of 10000-15000 pounds, the cost is $12 per hundredth cwt.
cost of transportation for shipment 3 = 11700 * 12/100= $1404.
The total cost of separate shipments = cost of transportation for shipment 1 +cost of transportation for shipment 2 + cost of transportation for shipment 3 = 512 + 1106 +1404 = $ 3022
B) If all the 3 shipments clubbed. The total wieght is 3200 + 7900 + 11700 = 22800 pounds.
Cost of transportation = $ 8 per hundredth Cwt.
total cost of transportation = 22800 * 8 /100 = $1824
the cost of drop of a shipment = $220 per shipment.
there are 3 shipments. So the cost of drop = $220 * 3 = $660
The total cost of transportation of 3 shipments consolidated = $1824 + $660 = $2484.
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