You are shipping 160 diamonds to a customer located 2,000 miles away. The averag

Question

You are shipping 160 diamonds to a customer located 2,000 miles away. The average value of each diamond is $1,050. You can ship via air for $360 and the diamonds will arrive in two days or you can ship via a specialty ground carrier for $130 and the diamonds will arrive in six days. You figure your inventory carrying cost is 17 percent. Your customer will immediately transfer funds to your bank account on receipt of the shipment.

What is your total cost if you use the ground carrier and the air carrier? (Use 365 days in a year. Do not round intermediate calculations. Round your answers to 2 decimal places.)

Explanation / Answer

The total cost using air carrier = 160*1050 + 360 + 2*.17*160*1050 = $282960

The total cost using ground carrier = 160*1050 + 130 + 6*.17*160*1050 = $339490

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