Suppose you have three shipments to make. One shipment has a weight of 4,500 pou
ID: 427532 • Letter: S
Question
Suppose you have three shipments to make. One shipment has a weight of 4,500 pounds, the second weighs 9,200 pounds, and the third weighs 13,000 pounds. The transportation rates are: $25/cwt (1 cwt. = 100 pounds). for shipments of 1,000–5,000 pounds, $23/cwt. for 5,000–10,000 pounds, and $21/cwt. for shipments over 10,000 pounds. For consolidated shipments, there is a charge of $350 per stop.
a. Calculate the three individual shipments and consolidated shipments.
b. What will be the cost difference if you choose to consolidate the shipments rather than to ship each one individually?
Explanation / Answer
Given values:
Shipment 1 weight = 4,500 pounds
Shipment 2 weight = 9,200 pounds
Shipment 3 weight = 13,000 pounds
Transportation rates are given as;
1,000 – 5,000 pounds, Rate = $25/cwt
5,000–10,000 pounds, Rate = $23/cwt
Over 10,000 pounds, Rate = $21/cwt
Consolidated shipments charge = $350 per stop.
(1 cwt. = 100 pounds)
Solution:
(a) Total cost of individual shipments is calculated as below:
= [(4,500 pounds / 100) x ($25)] + [(9,200 pounds / 100) x ($23)] + [(13,000 pounds / 100) x ($21)]
= $1,125 + $2,116 + $2,730
= $5,971
Total cost of individual shipments = $5,971
Total cost of consolidated shipments is calculated as below:
Consolidated shipment = 4,500 pounds + 9,200 pounds + 13,000 pounds
Consolidated shipment = 26,700 pounds
Consolidated shipments charge = $350 per stop.
Total number of stops = 3 (Number of shipments = 3)
Consolidated shipment cost is given as;
= [(26,700 pounds / 100) x ($21)] + (3 x $350)
= $5,607 + $1,050
= $6,657
Total cost of consolidated shipments = $6,657
(b) Cost difference between consolidated shipments and individual shipments is given as;
Cost difference = Total cost of consolidated shipments — Total cost of individual shipments
Cost difference = $6,657 — $5,971
Cost difference = $686
The consolidated shipments costs $686 more than individual shipments.
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