A manager must make a decision on shipping. There are two shippers, A and B. Bot
ID: 331591 • Letter: A
Question
A manager must make a decision on shipping. There are two shippers, A and B. Both offer a two-day rate: A for $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.) Cost Option 2 days Cost 2 days 3 days 9 days 7 days Ship two-day using A Ship three-day usingA Ship nine-day using A Ship two-day using B Ship four-day using B Ship seven-day using BExplanation / Answer
Total cost for any option = Shipping rate + Daily inventory carrying cost x applicable number of days the shipping rate is valid for
Therefore ,
Total cost of 2 days rate offered by A = $500 + $40.27 X 2 = $500 + $80.54 = $580.54
Total cost of 2 days rate offered by B = $525 + $40.27 x 2 = $525 + 80.54 = $605.54
Total cost of 3 days rate offered by A = $460 + $40.27 x 3 = $460 + $120.81 = $580.81
Total cost of 9 days rate offered by A = $400 + $40.27 x 9 = $400 + $362.43 = $762.43
Total cost of 4 days rate offered by B = $450 + $ 40.27 x 4= $450 + $161.08 = $611.08
Total cost of 7 days rate offered by B = $410 + $40.27 x 7 = $410 + $281.89 = $691.89
A
B
Option ( days)
Cost ( $ )
Option ( days )
Cost ( $ )
2
580.54
2
605.54
3
580.81
4
611.08
9
762.43
7
691.89
Since 2 days shipping rate offered by A is the least cost option, would recommend the same
A
B
Option ( days)
Cost ( $ )
Option ( days )
Cost ( $ )
2
580.54
2
605.54
3
580.81
4
611.08
9
762.43
7
691.89
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