Problem 11-1 Richard\'s Sporting Goods needs to fill an online order for 194 hoc

Question

Problem 11-1 Richard's Sporting Goods needs to fill an online order for 194 hockey sticks. The manager is considering shipping the order by truck to the customer in Wisconsin, at a carrier charge of $125. The delivery will take ten days and the order is paid on delivery (Richard's doesn't get paid until the sticks are received). The hockey sticks are valued at $105 for each stick and Richard's uses a 25 percent annual inventory carrying charge. a. What will be the total shipping and transit inventory cost of the shipment? (Use 365 days in a year. Do not round intermediate calculations. Round your answers to 2 decimal places.) Transit inventory cost Total cost b-1. If the shipment could be delivered in only 2 days at a cost of $270, then what will be the total shipment cost? (Use 365 days in a year. Do not round intermediate calculations Round your answer to 2 decimal places.) Total cost b-2. If the manager chose the above option, how much money would be saved or lost? (Round your answer to 2 decimal places.) if the manager chose this option,the company would

Explanation / Answer

a)Transit Inventory cost = (10/365) * 105 * 194 * 25% = $139.52

Carrying cost= $125

Total shipping cost = Transit inventory cost + Carrying cost

                                    = $139.52 + $ 125 = $264.52

b)In this case:

Transit Inventory cost = (2/365) * 105 * 194 * 25% = $27.90

Carrying cost= $270

Total shipping cost = Transit inventory cost + Carrying cost

                                    = $27.90+ $ 270 = $297.90

c) If the company chose option b, the company would lose $(297.90-264.52) = $33.38

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