Richard’s Sporting Goods needs to fill an online order for 168 hockey sticks. Th
ID: 371286 • Letter: R
Question
Richard’s Sporting Goods needs to fill an online order for 168 hockey sticks. The manager is considering shipping the order by truck to the customer in Wisconsin, at a carrier charge of $115. The delivery will take five 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 $40 for each stick and Richard’s uses a 15 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.)
b-1. If the shipment could be delivered in only 2 days at a cost of $140, 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.)
b-2. If the manager chose the above option, how much money would be saved or lost? (Round your answer to 2 decimal places.)
Transit inventory cost Total costb-1. If the shipment could be delivered in only 2 days at a cost of $140, 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 costb-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 wouldExplanation / Answer
Answer to question a :
Shipping cost = $115
Transit inventory cost = Number of hockey sticks x 15% of $40/hockey stick x 5 days transit/ 365 days a year
= 168 x 6 x 5/ 365
= $13.81
Hence, Total cost = Shipping cost + Transit inventory cost = $115 + $13.81 = $128.81
Answer to question b1:
Shipping cost = $140
Transit inventory cost = Number of hockey stick x 15% of $40/ hockey stock x 2/365
= 168 x 6 x 2/365
= $5.52
Hence, Total cost = Shipping cost + Total inventory cost = $140 + $5.52 = $145.52
Answer to question b2:
By choosing above option as stated in question b1, we will lose = $145.52 - $128.81 = $16.71
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