Case 11.1 Let there be light lamp shade company. Answer the 7 questions at the e
ID: 355534 • Letter: C
Question
Case 11.1 Let there be light lamp shade company. Answer the 7 questions at the end please and Thank you I am stuck
Located 60 miles from Chicago, Illinois, the let there be light lamp shade company, which designs and builds custom lamp shapes and lamp globes, historically derived all of its sales from customers in the United States and Canada. Recently, an architectural firm that often contracted with let there be llight was commisioned to design several large public buildings in the Peoples Republic of China. These buildings would require let there be light to supply 8,100 identical lights, and the relevant terms of sale would include delivery to the Port of Shanghai where the architectural firm would take possession. Let there be light designed a prototype cylindrical lamp shade that measured 11 inches high and ll inches in diameter and would be packed into cartons that measured 12 inches by 12 inches by 12 inches. We refer to these shades as Style A. The style A lamp shades would cost $4 each to manufacture and weighed nine pounds each; each carton cost 60 cents and weighed one pound, meaning that each loaded Style A carton weighed 10 pounds.
In effort to reduce packaging costs and also enhance the company's commitment to environmental logistics. Let there be light also developed two prototype lamp shades reffered to style B and Style C in the shape of a cone, rather than a cylinder. One advantage to conical shades is that they can be nested that is stacked inside each other, meaning that, unlike Style A, multiple lamp shades could be packed into a single carton. Morever, the nested shades would also help protect each other, although a slight bit of padding would be needed between the nested shades. The production costs for the conical lamp shades would be higher than those for the cylindrical shades.
Let there be light determined that each Style B lamp shade would cost $4.50 to manufacture and could be shipped nested, with six lamp shades per carton. The carton dimensions were 12 inches by 12 inches by 40 inches, and when holding six shades, a carton weighed 62 pounds. Each Style B carton cost $2.00, and this included padding between the shades. Each Style C lamp shade would cost $5 to make and could be shipped nested, with 10 lamp shades per carton. The carton dimensions were 12 inches by 12 inches by 48 inches and when holding 10 shades a carton weighed 101 pounds. Each carton cost $2.25, including padding between the individual shades.
The lamp shades would be loaded into intermodal containers and transported by rail to the port of Vancouver. The transportation cost to Vancouver was $1400 per 40-foot container, without regard to weight, although the total shipment weight could not exceed 44,000 pounds per container because of highway weight restrictions. The interior dimensions of the intermodal container were 8 feet wide by 8.5 feet high by 40 feet long. Insurance costs were 2 percent of value of the shipment ready to be loaded aboard ship in Vancouver (i.e. all of the company's costs up to this point). Let there be light learned that the transportation cost from the Port Vancouver to the Port of Shanghai were $800 for a 40-foot container.
Questions
1. How many Style A shades can be loaded into a 40-foot container?
2. How many Style B shades can be loaded into a 40-foot container?
3. How many Style C shades can be loaded into a 40-foot container?
4. What are the total costs of delivering the Style A shades to the Port of Shanghai?
5. What are the total costs of delivering the Style B shades to the Port of Shanghai?
6. What are the total costs of delivering the Style C shades to the Port of Shanghai?
7. Which style would you recommend? Why?
Explanation / Answer
Volume of 40 foot container is 2720 cu feet
1 cubic feet = 1728 cubic inches
Thus Volume of 40 foot container in cubic inches = 4700160 cu inches (A)
Let us look at the 2 cost components –
Cost of Manufacturing = 8100 units X $4 = $ 32,400
Cost of transport is detailed below –
Number of cartons required = 8100
Cost of Cartons (@ $ 0.6) = $ 4860
Total weight of carton + lamp = 10 pounds
Total weight of a fully loaded container = 2720 X 10 = 27200 pounds (so full weight is within permissible limit of 44,000 pounds per container)
Cost of transporting 1 container to Vancouver = $ 1400
Number of containers required to transport 8100 lamps = 8100 / 2720 = 3
Total cost of transporting containers to Vancouver = 3X1400 = $ 4,200
Total value shipment in 3 containers = 32,400 + 4,860 + 4,200 = $ 41,460
Insurance = 2% of 41,460 = $ 829.2
Total cost of transporting 3 containers from Vancouver to Shanghai = 800 X 3 = $ 2,400
Total Cost of delivering Style A to Shanghai =41,460 + 829.2 + 2,400 = $ 44,689.2
5. Cost of delivering Style B to Shanghai –
Cost of Manufacturing = 8100 units X $4.50 = $ 36,450
Cost of transport is detailed below –
Number of cartons required = 8100 / 6 = 1350
Cost of Cartons (@ $ 2) = $ 2,700
Total weight of carton + lamp = 62 pounds
Total weight of a fully loaded container = 816 X 62 = 50,592 pounds (so full weight is more than permissible limit of 44,000 pounds per container)
Number of packed cartons weighing less than 44,000 pounds = 709
Thus, 1 style B container will carry a maximum of 709 cartons
Number of containers required to transport 8100 lamps in 1350 cartons = 1350 / 709 = 2 (rounded down)
Cost of transporting 1 container to Vancouver = $ 1400
Total cost of transporting containers to Vancouver = 2X1400 = $ 2,800
Total value shipment in 3 containers = 36450 + 2700 + 2800 = $ 41,950
Insurance = 2% of 41,950 = $ 839
Total cost of transporting 2 containers from Vancouver to Shanghai = 800 X 2 = $ 1,600
Total Cost of delivering Style B to Shanghai =41,950 + 839 + 1600 = $ 44,389
6. Cost of delivering Style C to Shanghai –
Cost of Manufacturing = 8100 units X $5 = $ 40,500
Cost of transport is detailed below –
Number of cartons required = 8100 / 10 = 810
Cost of Cartons (@ $ 2.25) = $ 1,822.5
Total weight of carton + lamp = 101 pounds
Total weight of a fully loaded container = 680 X 101 = 68,680 pounds (so full weight is more than permissible limit of 44,000 pounds per container)
Number of packed cartons weighing less than 44,000 pounds = 435
Thus, 1 style B container will carry a maximum of 435 cartons
Number of containers required to transport 8100 lamps in 810 cartons = 810 / 435 = 2 (rounded down)
Cost of transporting 1 container to Vancouver = $ 1400
Total cost of transporting containers to Vancouver = 2X1400 = $ 2,800
Total value shipment in 3 containers = 40500 + 1822.5 + 2800 = $ 45,122.5
Insurance = 2% of 45,122.5 = $ 902.45
Total cost of transporting 2 containers from Vancouver to Shanghai = 800 X 2 = $ 1,600
Total Cost of delivering Style C to Shanghai =45,122.5 + 902.45 + 1600 = $ 47,624.95
7. Style B is the best option. Total cost of delivering is less, lamp design is conical which means the nested packaging will act as added protection and reduce damages in shipment compared to Style A and C.
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