A manager must make a decision on shipping. There are two shippers. A and B Both

Question

A manager must make a decision on shipping. There are two shippers. A and B Both offer a two-day rate A tor $500 and B for $525 In addition. A offers a three-day rate of $460 and a nine-day rate of $400, and B offers a four-day rate of $450 and a seven-day rate of $410. Annual holding costs are 35 percent of unit price Three hundred boxes are to be shipped, and each box has a price of $140 Which shipping alternative would you recommend? (Round your intermediate calculations to 3 decimal places and final answers to 2 decimal places. Omit the *'$" sign in your response.)

Explanation / Answer

Given

boxes to be shipped = 300

box price = $ 140

Total price = 140* 300= 42000

Total holding cost= 0.35 * 42000 = 14,700

Holding cost per day = 14,700/ 365 = 40.27

Shipper A

Shipper B

Shipper A 2-day is the best alternative because the total cost is very low when compare with other alternatives

Alternatives Shipping cost Incremental days Incremental cost Total cost 2 - day 500 0 0 500 3- day 460 1 = 1* 40.27= 40.27 =460+40.27= 500.27 9- day 400 7 =7*40.27= 281.92 = 400+ 281.92 =681.92

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