You are shipping 190 diamonds to a customer located 2,000 miles away. The averag
ID: 469675 • Letter: Y
Question
You are shipping 190 diamonds to a customer located 2,000 miles away. The average value of each diamond is $1,200. You can ship via air for $390 and the diamonds will arrive in two days or you can ship via a specialty ground carrier for $160 and the diamonds will arrive in six days. You figure your inventory carrying cost is 23 percent. Your customer will immediately transfer funds to your bank account on receipt of the shipment. What is your total cost if you use the ground carrier and the air carrier? (Use 365 days in a year. Do not round intermediate calculations. Round your answers to 2 decimal places.)
Please list out steps.
Total cost using air carrier $ Total cost using ground carrier $Explanation / Answer
Total Cost Using air carrier= Transit Cost via air + Inventory Carrying Cost
Transit Cost via air=390
Inventory Carrying cost=Av. price of diamond*Number of diamonds*(arrival time/365)*Carrying cost rate
=1200*190*(2/365)*0.23=287.34
hence total Cost=390+287.34=677.34
Similary Total Cost for Ground Carrier=160+1200*190*(6/365)*0.23=160+862.02=1022.02
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