Your options for shipping ?$101650 of machine parts from Baltimore to Kuala? Lum
ID: 331712 • Letter: Y
Question
Your options for shipping ?$101650 of machine parts from Baltimore to Kuala? Lumpur, Malaysia, are? (1) use a ship that will take 32 days at a cost of ?$3630?, or? (2) truck the parts to Los Angeles and then ship at a total cost of ?$4900. The second option will take only 20 days. You are paid via a letter of credit the day the parts arrive. Your holding cost is estimated at 30?% of the value per year. ?a) ? Alternative 2 Alternative 1 is more? economical, with a daily holding cost of ?$ nothing. ?(Enter your response rounded to two decimal? places.)
Explanation / Answer
Holding cost per year = 30% of the value = 30% of $101650 = $30495
Holding cost per day = $30495/365 = $83.548
Total cost of option 1 = Shipping cost + Holding cost for 32 days = 3630 + 32*83.548 = $6303.54
Total cost of option 2 = Shipping cost + Holding cost for 20 days = 4900 + 20*83.548 = $6570.96
So option 1 is more economical
If there is no holding cost, then also option 1 is more economical as it takes only $3630
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