A company would like to calculate a cost-to-cost trade-off analysis for the foll
ID: 330755 • Letter: A
Question
A company would like to calculate a cost-to-cost trade-off analysis for the following scenario Cost to ship by rail $0.076 per unit per kilometer shipped Cost to ship by truck $0.08 per unit per kilometer shipped Number of units to be shipped 102,000 Cost of delay due to slower shipping time if rail is used $10,600 Provide a cost-to-cost trade-off calculation for the rail-versus-truck alternative ? atatotal cost including any delay costs where applicable) 0 S Enter Based on the cost to-cost trade-off calculations, the company should ship by response as a whole number.) rExplanation / Answer
Solution:
The cost-to-cost trade-off analysis is conducted to determine the better alternative on the basis of the total cost involved. In the given scenario, two alternatives are provided - (1) To ship by rail or (2) To ship by truck. The cost-to-cost trade-off analysis for both the alternatives is shown below:
Shipping by Rail
Cost to ship by rail = $0.076 per unit per kilometer shipped
Cost of delay due to slower shipping time if rail is used = $10,600
Number of units to be shipped = 102,000
Total costs to ship by rail = (Per unit costs x Number of units) + Cost of delay
Total costs to ship by rail = ($0.076 x 102,000) + $10,600
Total costs to ship by rail = $7,752 + $10,600
Total costs to ship by rail = $18,352
Shipping by truck
Cost to ship by truck = $0.08 per unit per kilometer shipped
Number of units to be shipped = 102,000
Total costs to ship by truck = (Per unit costs x Number of units)
Total costs to ship by truck = ($0.08 x 102,000)
Total costs to ship by truck = $8,160
Based on the cost-to-cost trade-off calculations, the company should ship by truck at a total cost of $8,160
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