Suppose Jones Company has orders from three customers located in the same market
ID: 371292 • Letter: S
Question
Suppose Jones Company has orders from three customers located in the same market area. One order has a total weight of 2,700 pounds, the second weighs 7,400 pounds, and the third weighs 11,200 pounds. The transportation carrier quotes a freight rate of $25 per hundredweight (or cwt.) for direct shipment to the customer for shipments weighing 1,000 to 4,999 pounds, $23 per cwt. for orders weighing 5,000 to 9,999 pounds, and $21 for shipments weighing between 10,000 and 15,000 pounds. Alternatively, the carrier’s rate for shipments weighing more than 20,000 pounds is $17.00 per cwt. However, if the orders are combined into one consolidated shipment, the carrier will charge $170 for each stop it is required to make.
a. Calculate the total cost with or without consolidated shipment charge.
b. Should Jones consolidate the three shipments?
Total cost using separate shipments Total cost using consolidated shipmentb. Should Jones consolidate the three shipments?
O Yes O NoExplanation / Answer
Using separate shipments:
Cost for item 1
= 27 * 25
= 675
Item 2 = 23 *74 = 1702
Item 3 = 112 * 21 = 2352
Total Cost = $ 4729
Consolidated shipment:
Total weight = 21300
Cost = 213 * 17 + 3 *170
= 3621 + 510
= 4131
Thus since the cost in the second case is lower, Jones should consolidate the 3 shipments.
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