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 4,800 pounds, the second weighs 9,500 pounds, and the third weighs 13,300 pounds. The transportation carrier quotes a freight rate of $20 per hundredweight (or cwt.) for direct shipment to the customer for shipments weighing 1,000 to 4,999 pounds, $18 per cwt. for orders weighing 5,000 to 9,999 pounds, and $16 for shipments weighing between 10,000 and 15,000 pounds. Alternatively, the carrier’s rate for shipments weighing more than 20,000 pounds is $12.00 per cwt. However, if the orders are combined into one consolidated shipment, the carrier will charge $380 for each stop it is required to make.

a. Calculate the total cost with or without consolidated shipment charge.

b. Should Jones consolidate the three shipments?

Explanation / Answer

Without Consolidated Shipment Charge, the cost is:

= 48*20 + 95*18 +133*16

= 960 + 1710 + 2128

= 4798

With consolidated shipment:

The cost = 380*3

= 1140

b. Yes, Jones should consolidate the three shipments as the cost incurred will be less.

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